1
Exhibit 5
AGREEMENT AND PLAN OF MERGER
by and among
SHP ACQUISITION, L.L.C.,
SHP OP, L.L.C.,
SHP PROPERTIES CORP.,
SUNSTONE HOTEL INVESTORS, INC.
and
SUNSTONE HOTEL INVESTORS, L.P.
July 12, 1999
2
TABLE OF CONTENTS
Page
ARTICLE 1 THE MERGER .............................................................................................. 1
Section 1.1 The Partnership Merger ........................................................ 1
Section 1.2 Closing; Effective Time ....................................................... 2
Section 1.3 Certificate and Agreement of Limited Partnership; Officers .................... 2
Section 1.4 Conversion of Seller Common OP Units .......................................... 2
Section 1.5 Conversion of Units Owned by Seller General Partner ........................... 3
Section 1.6 Seller-Owned Interests ........................................................ 3
Section 1.7 Conversion of Interests in Buyer Operating LLC ................................ 3
Section 1.8 Cancellation and Retirement of Seller Common OP Units ......................... 4
Section 1.9 Interest Elections ............................................................ 4
Section 1.10 Payment for Seller Common OP Units ............................................ 5
Section 1.11 Further Assurances ............................................................ 6
ARTICLE 2 REPRESENTATIONS AND WARRANTIES OF SELLER GENERAL PARTNER AND THE SELLER PARTNERSHIP ..................... 6
Section 2.1 Organization, Standing and Power .............................................. 6
Section 2.2 Authority; Noncontravention; Consents ......................................... 6
Section 2.3 Information Supplied .......................................................... 8
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF PARENT AND BUYER OPERATING PARTNERSHIP ................................ 8
Section 3.1 Organization, Standing and Power .............................................. 8
Section 3.2 Authority; Noncontravention; Consents ......................................... 8
Section 3.3 Information Supplied .......................................................... 9
ARTICLE 4 COVENANTS ............................................................................................... 10
Section 4.1 Reasonable Best Efforts; Additional Actions ................................... 10
Section 4.2 Notification of Certain Matters ............................................... 10
Section 4.3 Information Statement; Securities Filings ..................................... 10
ARTICLE 5 CONDITIONS TO CONSUMMATION OF THE PARTNERSHIP MERGER .................................................... 11
Section 5.1 Conditions to Each Party's Obligations to Effect the Partnership
Merger ........................................................................ 11
Section 5.2 Conditions to Seller General Partner's and the Seller Partnership's
Obligations to Effect the Partnership Merger .................................. 12
Section 5.3 Conditions to Parent's, Sub's and Buyer Operating LLC's
3
Obligations to Effect the Partnership ......................................... 12
ARTICLE 6 TERMINATION ............................................................................................. 13
Section 6.1 Termination ................................................................... 13
Section 6.2 Procedure for and Effect of Termination ....................................... 13
ARTICLE 7 MISCELLANEOUS ........................................................................................... 14
Section 7.1 Amendment and Modification .................................................... 14
Section 7.2 Waiver of Compliance; Consents ................................................ 14
Section 7.3 Survival ...................................................................... 14
Section 7.4 Notices ....................................................................... 14
Section 7.5 Assignment .................................................................... 15
Section 7.6 GOVERNING LAW ................................................................. 16
Section 7.7 Counterparts .................................................................. 16
Section 7.8 Enforcement ................................................................... 16
Section 7.9 Interpretation ................................................................ 16
Section 7.10 Entire Agreement .............................................................. 16
Section 7.11 No Third Party Beneficiaries .................................................. 17
Section 7.12 Severability .................................................................. 17
Section 7.13 Tax Election .................................................................. 17
EXHIBITS
Exhibit A LLC Agreement
Exhibit B Partnership Agreement
4
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of July 12, 1999, by and among
SHP Acquisition, L.L.C., a Delaware limited liability company ("Parent"), SHP
OP, L.L.C., a Delaware limited liability company ("Buyer Operating LLC"), SHP
PROPERTIES CORP., a Delaware corporation ("Sub"), SUNSTONE HOTEL INVESTORS,
INC., a Maryland corporation ("Seller General Partner" or "Seller"), and
SUNSTONE HOTEL INVESTORS, L.P., a Delaware limited partnership (the "Seller
Partnership").
WHEREAS, the respective Boards of Directors (or comparable body or
entity) of Parent, SHP Investors Sub, Inc., a Maryland corporation ("Buyer") and
Seller General Partner have approved the acquisition of the Seller and its
assets (including without limitation the Seller's interest in the Seller
Partnership) by Parent on the terms and subject to the conditions set forth in
the Agreement and Plan of Merger of even date herewith (the "Merger Agreement"),
by and among Parent, Buyer and Seller;
WHEREAS, it is proposed that, immediately prior to the merger of the
Buyer and Seller as contemplated by the Merger Agreement (the "Merger"), Buyer
Operating LLC will merge with and into the Seller Partnership (the "Partnership
Merger") on the terms and subject to the conditions of this Agreement;
WHEREAS, the Board of Directors of Seller General Partner, in light of
and subject to the terms and conditions set forth herein, (i) approved this
Agreement and (ii) resolved to recommend that the holders of Seller Common OP
Units adopt this Agreement and approve the Partnership Merger;
WHEREAS, Parent, Buyer Operating LLC, Sub, Seller General Partner and
the Seller Partnership desire to make certain representations, warranties,
covenants and agreements in connection with the Partnership Merger and also to
prescribe various conditions thereto; and
WHEREAS, capitalized terms used herein and not otherwise defined have
the respective meanings given them in the Merger Agreement.
NOW THEREFORE, in consideration of the representations, warranties,
covenants and agreements contained herein, and intending to be legally bound
hereby, the parties hereto agree as follows:
ARTICLE 1
THE MERGER
5
Section 1.1 The Partnership Merger. Upon the terms and subject to the
conditions of this Agreement, at the Effective Time (as defined in Section 1.2)
and in accordance with the Revised Uniform Limited Partnership Act of the State
of Delaware (the "DRULPA") and the Limited Liability Company Act of the State of
Delaware (the "DLLCA"), Buyer Operating LLC shall be merged with and into the
Seller Partnership, with the Seller Partnership as the surviving partnership in
the Partnership Merger (the "Surviving Operating Partnership"). At the Effective
Time, the separate existence of Buyer Operating LLC shall cease and the other
effects of the Partnership Merger shall be as set forth in Section 17-211 of the
DRULPA and Section 18-209 of the DLLCA.
Section 1.2 Closing; Effective Time. Provided that the conditions set
forth in Article 5 have been satisfied (or waived by the appropriate party), the
closing of the Partnership Merger (the "Closing") shall take place at the place
of the closing of the Merger set forth in Section 1.2(a) of the Merger
Agreement, on the Closing Date immediately prior to the closing of the Merger,
or at such other place, at such other time or on such other date as the parties
hereto may mutually agree. At the Closing, the parties hereto shall cause a
certificate of merger (the "Certificate of Merger") to be executed and filed
with the Secretary of State of the State of Delaware in accordance with the
DRULPA and the DLLCA. The Partnership Merger shall become effective as of the
date and time of such filing, or such other time within 24 hours after such
filing as the parties hereto shall agree to be set forth in the Certificate of
Merger (the "Effective Time"), which, in either case, shall be immediately prior
to the effective time of the Merger.
Section 1.3 Certificate and Agreement of Limited Partnership;
Officers. At the Effective Time, and without any further action on the part of
Buyer Operating LLC or the Seller Partnership, the agreement of limited
partnership as amended by the Partnership Agreement Amendments and the
certificate of limited partnership of the Seller Partnership, as in effect
immediately prior to the Effective Time, shall become, from and after the
Effective Time, the agreement of limited partnership and the certificate of
limited partnership of the Surviving Operating Partnership, until thereafter
amended as provided therein and under applicable law.
Section 1.4 Conversion of Seller Common OP Units. The Seller Common OP
Units issued and outstanding immediately prior to the Effective Time (including
the Seller Common OP Units owned by Seller General Partner) shall, at the
Effective Time, be converted into the following (the consideration set forth in
clauses (a) through (c) below being collectively referred to as the "OP Merger
Consideration"):
(a) for each Seller Common OP Unit with respect to which an
election to receive a Class A Unit (as defined below) has been effectively made
pursuant to Section 1.9 and not revoked or lost ("Class A Electing Units"), the
right to receive one fully paid and nonassessable "Class A Preferred Unit"
(each, a "Class A Unit") as provided in the Amended and Restated Limited
Liability Company Agreement of Parent attached hereto as Exhibit A (as amended,
supplemented or otherwise modified in accordance with the terms thereof and
hereof, the "LLC Agreement");
(b) for each Seller Common OP Unit with respect to which an
election to receive a Class B Unit (as defined below) has been effectively made
pursuant to Section 1.9 and not revoked or lost ("Class B Electing Units"), the
right to receive one fully paid and
6
nonassessable "Class B Common Unit" (each, a "Class B Unit") as provided in the
LLC Agreement; and
(c) for each Seller Common OP Unit, other than Class A
Electing Units and Class B Electing Units, the right to receive in cash, without
interest, an amount equal to the Common Merger Consideration (the "Cash Election
Price").
Notwithstanding the foregoing, if between the date of this Agreement
and the Effective Time the outstanding Seller Common OP Units or the Class A
Units (if any) or Class B Units (if any) shall have been changed into a
different number of units or a different class by reason of any distribution,
dividend, subdivision, reclassification, recapitalization, split, combination or
exchange of Seller Common OP Units, Class A Units (if any) or Class B Units (if
any), the Merger Consideration shall be correspondingly adjusted to reflect such
distribution, dividend, subdivision, reclassification, recapitalization, split,
combination or exchange. The Seller shall elect to receive the Cash Election
Price as OP Merger Consideration in exchange for its OP Units.
Section 1.5 Conversion of Units Owned by Seller General Partner. The
units of Seller Partnership that are deemed to be owned by Seller General
Partner in its capacity as the general partner of the Seller Partnership shall
immediately prior to the Effective Time (collectively, the "Seller GP
Interest"), at the Effective Time, by virtue of the Partnership Merger and
without any action on the part of Seller General Partner, also be converted into
the right to receive the Cash Election Price.
Section 1.6 Seller-Owned Interests. (a) Each Seller Common OP Unit that
is owned by Parent immediately prior to the Effective Time shall, at the
Effective Time, by virtue of the Partnership Merger and without any action on
the part of Parent or the Seller, automatically be canceled and retired and
cease to exist, and no consideration shall be delivered in exchange therefor.
(b) Each 7.9% Class A Cumulative Preferred Partnership Unit of
Seller Partnership (the "Seller Preferred Units") shall be redeemed prior to the
Partnership Merger in exchange for certain assets of the Seller Partnership as
described in Exhibit A to the Merger Agreement, and any such Seller Preferred
Units owned by Seller (if any) immediately prior to the Effective Time shall, at
the Effective Time, by virtue of the Partnership Merger and without any action
on the part of Seller, shall be converted into the right to receive the
"Liquidation Preference" (as such term is defined in the Articles Supplementary
of the Seller Preferred Units).
Section 1.7 Conversion of Interests in Buyer Operating LLC. The
aggregate interests in Buyer Operating LLC owned by Parent immediately prior to
the Effective Time shall, at the Effective Time, by virtue of the Partnership
Merger and without any action on the part of Surviving Operating Partnership or
Buyer Operating LLC, be converted into a 99% limited partnership interest in the
Surviving Operating Partnership. The aggregate interest in Buyer
7
Operating LLC owned by Sub immediately prior to the Effective time shall, at the
Effective Time, by virtue of the Partnership Merger and without any action on
the part of Buyer be converted into a 1% general partnership interest in the
Surviving Operating Partnership.
Section 1.8 Cancellation and Retirement of Seller Common OP Units. Each
Seller Common OP Unit converted into the right to receive the Merger
Consideration pursuant to Section 1.4 shall no longer be outstanding and shall
automatically be canceled and retired and shall cease to exist, and each holder
of a Seller Common OP Unit shall cease to have any rights with respect thereto,
except for the right to receive the Merger Consideration, if any, applicable
thereto.
Section 1.9 Interest Elections. (a) Subject to Section 1.9(e), each
holder of a Seller Common OP Unit shall be entitled, with respect to all, but
not less than all, of such holder's Seller Common OP Units, to make an
unconditional election, on or prior to the Election Date (as defined in Section
1.9(b)), to receive (i) Class A Units or Class B Units (a "Non-Cash Election")
or (ii) the Cash Election Price (a "Cash Election"), on the basis hereinafter
set forth, provided that any holder making a Non-Cash Election must be an
"accredited investor" as defined in Rule 501 promulgated under the Securities
Act and must not be an "interested stockholder" of Seller or an "affiliate" of
an "interested stockholder" of Seller, in each case as defined in subtitle 6 of
Title 3 of the Maryland General Corporation Law ("MGCL").
(b) Buyer Operating LLC shall prepare, and the Seller
Partnership shall mail pursuant to Section 4.3(a), a form of election, which
form shall be subject to the reasonable approval of Seller General Partner (the
"Form of Election"). The Form of Election shall be used by each holder of a
Seller Common OP Unit to designate such holder's election to exchange all, but
not less than all, of the Seller Common OP Units held by such holder into either
Class A Units, Class B Units or the Cash Election Price. Any such holder's
election to receive Class A Units, Class B Units or the Cash Election Price
shall be deemed to have been properly made only if Parent shall have received at
its principal executive office, not later than 5:00 p.m., New York City time on
the date that is five business days before the scheduled date of the Seller
Stockholders Meeting (the "Election Date"), a Form of Election specifying
whether such holder elects to receive Class A Units, Class B Units or the Cash
Election Price and otherwise properly completed and signed. The Form of Election
shall state therein the date that constitutes the Election Date.
(c) A Form of Election may be revoked by any holder of a
Seller Common OP Unit only by written notice received by Parent prior to 5:00
p.m., New York City time, on the Election Date. In addition, all Forms of
Election shall automatically be revoked if the Partnership Merger has been
abandoned.
(d) The reasonable determination of Parent shall be binding as
to whether or not elections to receive Class A Units, Class B Units or the Cash
Election Price have been properly made or revoked pursuant to this Section 1.9
and when elections and revocations were received by it. If Parent determines
that any election to receive Class A Units, Class B Units or the Cash Election
Price was not properly made (including, without limitation, because a Form of
Election was not properly delivered by the time specified in Section 1.9(b)),
the Seller Common OP Units with respect to which such election was not properly
made shall be treated by Parent as Seller Common OP Units for which a Cash
Election was made, and such Seller Common OP
8
Units shall be converted in accordance with Section 1.4(c). Parent may, with the
agreement of Seller General Partner, make such rules as are consistent with this
Section 1.9 for the implementation of the elections provided for herein as shall
be necessary or desirable fully to effect such elections.
(e) Parent reserves the right to require any holder of Seller
Common OP Units, as a condition to making a Non-Cash Election with respect to
such holder's Seller Common OP Units, to (i) represent to Parent that such
holder (x) is an "Accredited Investor" (as such term is defined under Rule 501
promulgated under the Securities Act) and (y) is not an "interested stockholder"
of Seller or an "affiliate" of an "interested stockholder" of Seller, in each
case as defined in Subtitle 6 of Title 3 of the MGCL and (ii) agree to abide by
the terms of the LLC Agreement and to become a party thereto.
Section 1.10 Payment for Seller Common OP Units. (a) Promptly after the
Effective Time, Surviving Operating Partnership shall pay the Merger
Consideration to which holders of Seller Common OP Units shall be entitled at
the Effective Time pursuant to Section 1.4(c). Holders of Seller OP Units being
paid the Cash Election Price shall be paid in accordance with the procedures and
provisions set forth in Section 1.9 of the Merger Agreement. Surviving Operating
Partnership shall be entitled to deduct and withhold, from the consideration
otherwise payable pursuant to Section 1.4(c) to any former holder of Seller
Common OP Units, such amounts as Surviving Operating Partnership is required to
deduct and withhold with respect to the making of such payment under the Code or
any provision of state, local or foreign tax law. To the extent that amounts are
so withheld by Surviving Operating Partnership, such withheld amounts shall be
treated for all purposes of this Agreement as having been paid to the former
holder of Seller Common OP Units in respect of which such deduction and
withholding was made by Surviving Operating Partnership.
(b) Each outstanding agreement for the issuance of warrants
with respect to Seller Common OP Units and the Seller Common OP Units which
would be issuable upon the exercise of such warrants (such OP Units, "OP Unit
Warrants") shall be subject to the terms of this Agreement. Seller shall use its
reasonable best efforts to cause each such OP Unit Warrant to be converted into
the right to receive from the Surviving Operating Partnership an amount of cash
equal to the excess, if any, of the Merger Consideration over the exercise price
for such OP Unit Warrant (the "Warrant Consideration"). Prior to the Effective
Time, Sellers shall take all steps necessary to give written notice to each
holder of a warrant with respect to Seller Common OP Units that each OP Unit
Warrant shall expire effective as of the Effective Time and be converted into
the right to receive the Warrant Consideration for such Seller Common OP Unit.
Any amounts payable pursuant to this Section 1.10(b) shall be subject to any
required withholding of taxes and shall be paid without interest.
(c) The Merger Consideration delivered in accordance with the
terms of Article 1 shall be deemed to have been issued (or paid, as applicable)
in full satisfaction of all rights pertaining to the Seller Common OP Units or
OP Unit Warrants.
(d) No interest shall be paid with respect to the Partnership
Merger or payment of the OP Merger Consideration or Warrant Consideration
thereunder.
Section 1.11 Further Assurances. If, at any time after the Effective
Time, the Surviving Operating Partnership shall determine or be advised that any
deeds, bills of sale, assignments,
9
assurances or any other actions or things are necessary or desirable to vest,
perfect or confirm of record or otherwise in the Surviving Operating Partnership
the right, title or interest in, to or under any of the rights, properties or
assets of the Seller Partnership acquired or to be acquired by the Surviving
Operating Partnership as a result of, or in connection with, the Redemption, the
Partnership Merger or otherwise to carry out this Agreement, the Surviving
Operating Partnership shall be authorized to execute and deliver, in the name
and on behalf of each of Buyer Operating LLC and the Seller Partnership or
otherwise, all such deeds, bills of sale, assignments and assurances and to take
and do, in the name and on behalf of each of Buyer Operating LLC and the Seller
Partnership or otherwise, all such other actions and things as may be necessary
or desirable to vest, perfect or confirm any and all right, title and interest
in, to and under such rights, properties or assets in the Surviving Operating
Partnership or otherwise to carry out this Agreement.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES
OF SELLER GENERAL PARTNER AND THE SELLER PARTNERSHIP
Each of Seller General Partner and the Seller Partnership represents
and warrants to Buyer Operating LLC, Sub and Parent as follows:
Section 2.1 Organization, Standing and Power. Seller Partnership is
duly organized and validly existing under the Laws of Delaware. Seller
Partnership has the requisite limited partnership power and authority to carry
on its business as now being conducted. Seller Partnership is duly qualified or
licensed to do business as a foreign corporation or limited partnership and is
in good standing in each jurisdiction in which the nature of its business or the
ownership or leasing of its properties makes such qualification or licensing
necessary, other than in such jurisdictions where the failure to be so qualified
or licensed, individually or in the aggregate, would not have a Seller Material
Adverse Effect. Seller Partnership has delivered to Surviving Operating
Partnership complete and correct copies of its organizational documents, in each
case, as amended to the date of this Agreement. Attached hereto as Exhibit B is
a complete and correct copy of Seller Partnership's Second Amended and Restated
Agreement of Limited Partnership ("the Partnership Agreement"). The Partnership
Agreement has not been amended subsequent to the date hereof, except for such
amendments as are permitted and referred to in Section 4.3(a) of this Agreement.
Section 2.2 Authority; Noncontravention; Consents. (a) Each of Seller
General Partner and Seller Partnership has the requisite corporate or limited
partnership power and authority to enter into this Agreement and, subject to the
Seller Partner Approval, to consummate the transactions contemplated by this
Agreement to which it is a party. The execution and delivery of this Agreement
by Seller General Partner and Seller Partnership and the consummation by Seller
General Partner and Seller Partnership of the transactions contemplated by this
Agreement to which Seller General Partner and/or Seller Partnership is a party
have been duly authorized by all necessary corporate or limited partnership
action on the part of Seller General Partner and Seller Partnership, except for
the Seller Partner Approval. This Agreement has been duly executed and delivered
by Seller General Partner and Seller Partnership and constitutes a valid and
binding obligation of each of Seller General Partner and Seller Partnership,
enforceable against each of Seller General Partner and Seller Partnership in
10
accordance with and subject to its terms, subject to applicable bankruptcy,
insolvency, moratorium or other similar Laws relating to creditors' rights and
general principles of equity.
(b) Except as disclosed in the Seller Disclosure Letter, the
execution and delivery of this Agreement by each of Seller General Partner and
Seller Partnership does not, and the consummation by Seller Partnership of the
transactions contemplated by this Agreement to which it is a party and
compliance by it with the provisions of this Agreement will not, require any
consent, approval or notice under, or conflict with, or result in any violation
of, or default (with or without notice or lapse of time, or both) under, or give
rise to a right of termination, cancellation or acceleration of any obligation
or to loss of a benefit under, or result in the creation of any Lien upon any of
the properties or assets of Seller General Partner, Seller Partnership or any
Seller Subsidiary, under, (i) the certificate or articles of incorporation or
the by-laws or organizational documents or partnership or similar agreement (as
the case may be) of Seller General Partner, Seller Partnership or any Seller
Subsidiary, each as amended or supplemented to the date hereof, (ii) any loan or
credit agreement, note, bond, mortgage or indenture to which Seller General
Partner, Seller Partnership or any Seller Subsidiary is a party; (iii) any
reciprocal easement agreement, lease, joint venture agreement, development
agreement, benefit plan or other agreement, instrument, permit, concession,
franchise or license applicable to Seller General Partner, Seller Partnership or
any Seller Subsidiary or their respective properties or assets; or (iv) subject
to the governmental filings and other matters referred to in the following
sentence, any Laws applicable to Seller General Partner, Seller Partnership or
any Seller Subsidiary, or their respective properties or assets, other than in
the case of clauses (iii) or (iv), any such conflicts, violations, defaults,
rights, loss or Liens that individually or in the aggregate would not reasonably
be expected to (x) have a Seller Material Adverse Effect or (y) prevent or delay
beyond the Outside Date the consummation of the transactions contemplated by
this Agreement, provided that no representation or warranty is made in this
sentence as to any agreement with Lessee, Manager or any of their Affiliates. No
consent, approval, order or authorization of, or registration, declaration or
filing with, any Governmental Entity is required by or with respect to Seller
General Partner, Seller Partnership or any Seller Subsidiary in connection with
the execution and delivery of this Agreement or the consummation of the
transactions contemplated hereby except for (i) the filing of the Certificate of
Merger with the Secretary of State of the State of Delaware, (ii) any filings
required under the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as
amended (the "HSR Act"), (iii) the filing of a Form D with the SEC and (iv) such
other consents, approvals, orders, authorizations, registrations, declarations
and filings (A) as are set forth in Section 2.4 of the Merger Agreement or
Section 2.4 of the Seller Disclosure Letter, (B) as required by the "blue sky"
laws of various states, to the extent applicable or (C) those which, if not
obtained or made, would not prevent or delay beyond the Outside Date the
consummation of any of the transactions contemplated by this Agreement or
otherwise prevent or delay beyond the Outside Date Seller Partnership from
performing its obligations under this Agreement in any material respect or have,
individually or in the aggregate, a Seller Material Adverse Effect.
Section 2.3 Information Supplied. None of the information supplied by
Seller General Partner or the Seller Partnership for inclusion or incorporation
by reference in the Information Statement (as defined in Section 4.3), any
Additional Filings (as defined Section 4.3) or Solicitation Documents (as
defined in Section 4.3), the Consent Solicitation Statement (as defined Section
4.3) or the Solicitation Documents shall, at the time of mailing thereof and at
the Closing Date, contain any untrue statement of material fact or omit to state
any material fact necessary in order to make the statements therein, in light of
the circumstances under which they
11
were made, not misleading.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES
OF PARENT AND BUYER OPERATING PARTNERSHIP
Each of Parent, Sub and Buyer Operating LLC represents and warrants to
Seller General Partner and the Seller Partnership as follows:
Section 3.1 Organization, Standing and Power. (a) Buyer Operating LLC
is a limited liability company and Sub is a corporation, in each case duly
organized and validly existing under the Laws of Delaware and each has the
requisite power and authority to carry on its business as now being conducted.
Each of Buyer Operating LLC and Sub is duly qualified or licensed to do business
as a foreign limited liability company, in the case of Buyer Operating LLC, or a
foreign corporation, in the case of Sub, and is in good standing in each
jurisdiction in which the nature of its business or the ownership or leasing of
its properties makes such qualifications or licensing necessary, other than in
such jurisdictions where the failure to be so qualified or licensed,
individually or in the aggregate, would not have a Parent Material Adverse
Effect. Each of Buyer Operating LLC and Sub has delivered to Seller complete and
correct copies of its organizational documents as amended or supplemented to the
date of this Agreement. Attached hereto as Exhibit A is a true and complete copy
of the LLC Agreement. The LLC Agreement has not been amended subsequent to the
date hereof except for such amendments which could be made without the approval
of the holders of the Seller Common OP Units who make a Non-Cash Election had
such amendment been made immediately after the Effective Time.
(b) Buyer Operating LLC is newly formed and, except for
activities incident to the acquisition of Seller Partnership, Buyer Operating
LLC has not (i) engaged in any business activities of any type or kind
whatsoever or (ii) acquired any property of any type or kind whatsoever.
Section 3.2 Authority; Noncontravention; Consents. (a) Each of Parent,
Sub and Buyer Operating LLC has the requisite power and authority to enter into
this Agreement and to consummate the transactions contemplated by this Agreement
to which it is a party. The execution and delivery of this Agreement by Parent,
Sub and Buyer Operating LLC and the consummation by Parent, Sub and Buyer
Operating LLC of the transactions contemplated by this Agreement to which
Parent, Sub and/or Buyer Operating LLC is a party have been duly authorized by
all necessary action on the part of Parent, Sub and Buyer Operating LLC
(including, without limitation, the issuance of the Class A Units and the Class
B Units in the Partnership Merger). This Agreement has been duly executed and
delivered by Parent, Sub and Buyer Operating LLC, enforceable against each of
them in accordance with and subject to their respective terms, subject to
applicable bankruptcy, insolvency, moratorium or other similar Laws relating to
creditors' rights and general principles of equity.
(b) Except as disclosed in the Buyer Disclosure Letter, the
execution and delivery of this Agreement by each of Parent, Sub and Buyer
Operating LLC does not, and the consummation of the transactions contemplated by
this Agreement by Buyer Operating LLC to
12
which it is a party and compliance by it with the provisions of this Agreement
will not, conflict with, or result in any violation of or default (with or
without notice or lapse of time, or both) under, or give rise to a right of
termination, cancellation or acceleration of any material obligation or to loss
of a material benefit under, or result in the creation of any Lien upon any of
the properties or assets of Parent, Sub, Buyer Operating LLC or any of its other
Subsidiaries under, (i) the organizational or governing documents of Parent, Sub
or Buyer Operating LLC or the comparable certificate of incorporation or
organizational documents or partnership or similar agreement (as the case may
be) of any other Subsidiary of Parent, each as amended or supplemented to the
date of this Agreement, (ii) any loan or credit agreement, note, bond, mortgage,
indenture, reciprocal easement agreement, lease or other agreement, instrument,
permit, concession, franchise or license applicable to Surviving Operating
Partnership or any of its Subsidiaries or their respective properties or assets
or (iii) subject to the governmental filings and other matters referred to in
the following sentence, any Laws applicable to Parent or any of its Subsidiaries
or their respective properties or assets, other than, in the case of clause (ii)
or (iii), any such conflicts, violations, defaults, rights, loss or Liens that
individually or in the aggregate would not reasonably be expected to (x) have a
Parent Material Adverse Effect or (y) prevent the consummation of the
transactions contemplated by this Agreement. No consent, approval, order or
authorization of, or registration, declaration or filing with, any Governmental
Entity is required by or with respect to Parent, Sub, Buyer Operating LLC or any
of its other Subsidiaries in connection with the execution and delivery of this
Agreement by Parent, Sub or Buyer Operating LLC or the consummation of the
transactions contemplated hereby, except for (i) the filing of the Certificate
of Merger with the Secretary of State of the State of Delaware, (ii) any filings
required under the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as
amended (the "HSR Act"), (iii) the filing of a Form D with the SEC and (iv) such
other consents, approvals, orders, authorizations, registrations, declarations
and filings (A) as are Required Consents (as defined in the Merger Agreement) or
are set forth in Section 3.3 of the Merger Agreement, (B) as required by the
"blue sky" laws of various states, to the extent applicable or (C) those which,
if not obtained or made, would not prevent or delay beyond the Outside Date the
consummation of any of the transactions contemplated by this Agreement or
otherwise prevent Parent, Sub or Buyer Operating LLC from performing its
obligations under this Agreement in any material respect or have, individually
or in the aggregate, a Parent Material Adverse Effect.
Section 3.3 Information Supplied. None of the information supplied by
Parent, Sub or Buyer Operating LLC for inclusion or incorporation by reference
in the Information Statement, any Additional Filings, the Consent Solicitation
Statement or other Solicitation Documents shall, at the time of mailing thereof
and at the Closing Date, contain any untrue statement of material fact or omit
to state any material fact necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading.
ARTICLE 4
COVENANTS
13
Section 4.1 Reasonable Best Efforts; Additional Actions. Upon the terms
and subject to the conditions of this Agreement, each of the parties hereto
shall use all reasonable best efforts to take, or cause to be taken, all
actions, and to do or cause to be done, and to assist and cooperate with the
other parties in doing, all things necessary, proper or advisable to consummate
and make effective as promptly as practicable the transactions contemplated by,
and in connection with, this Agreement. In connection with and without limiting
the foregoing, Seller General Partner shall take all necessary action to obtain
the requisite consent of the holders of Seller Common OP Units with respect to
the Seller Partner Approval, including the delivery contemporaneously with the
execution of this Agreement of an executed voting agreement and consents in the
form attached as Exhibit E to the Merger Agreement with respect to the adoption
of this Agreement, approval of the Partnership Merger and approval of the
Partnership Agreement Amendments.
Section 4.2 Notification of Certain Matters. Each of Seller General
Partner and the Seller Partnership shall give notice to Parent, Sub and Buyer
Operating LLC, and each of Parent, Sub and Buyer Operating LLC shall give notice
to Seller General Partner and the Seller Partnership, promptly upon becoming
aware of (a) any occurrence, or failure to occur, of any event, which occurrence
or failure to occur has caused or would reasonably be expected to cause any
representation or warranty that is qualified as to materiality in this Agreement
to be untrue or inaccurate or any representation or warranty that is not so
qualified to be untrue or inaccurate in any material respect at any time after
the date hereof and prior to the Closing Date and (b) any material failure on
its part to comply with or satisfy any covenant, condition or agreement to be
complied with or satisfied by it hereunder; provided that the delivery of any
notice pursuant to this Section 4.2 shall not limit or otherwise affect the
remedies available hereunder to the party receiving such notice.
Section 4.3 Information Statement; Securities Filings. (a) To the
extent the Seller Partnership has received the Seller Partner Approval in the
form of valid written consents executed by partners of the Seller Partnership
promptly after the date hereof, Seller Partnership and Parent shall jointly
promptly prepare an Information Statement of Seller Partnership and Parent for
use in connection with the offering of units of limited liability company
interest in Parent (the "Information Statement). The Information Statement shall
comply as to form in all material respects with the requirements of the
Securities Act and the rules and regulations thereunder applicable to an
offering of securities exempt from registration under the Securities Act
pursuant to Rule 506 thereunder. The parties shall cooperate and promptly
prepare and the appropriate party shall file with the SEC as soon as practicable
any other filings required under the Exchange Act ("Additional Filings") with
respect to the transactions contemplated hereby. Parent shall take all actions
required to be taken under any applicable federal and state securities laws in
connection with the issuance of the Class A Units and the Class B Units in the
Partnership Merger pursuant to this Agreement, including but not limited to the
filing with the SEC of a "Notice of Sale of Securities Pursuant to Regulation D"
on Form D.
(b) To the extent the Seller Partnership has not received the
Seller Partner Approval in the form of valid written consents executed by
partners of the Seller Partnership promptly after the date hereof, Seller
Partnership and Parent shall jointly and promptly prepare a Consent Solicitation
Statement soliciting the written consent of the holders of Seller OP Units to
the adoption of this Agreement and the approval of the Partnership Merger (the
"Consent
14
Solicitation Statement"), which Consent Solicitation Statement shall contain a
description of the terms of the Class A Preferred Units and the Class B Units
and the recommendation of Seller General Partner's Board of Directors that the
holders of Seller OP Units consent to the adoption of this Agreement and the
approval of the Partnership Merger. The Consent Solicitation Statement shall
comply as to form in all material respects with the requirements of the
Securities Act and the rules and regulations thereunder applicable to an
offering of securities exempt from registration under the Securities Act
pursuant to Rule 506 thereunder. As soon as practicable following the mailing of
the Proxy Statement in connection with the Merger, Seller Partnership shall mail
the Consent Solicitation Statement, together with a form of written consent, a
Form of Election and any other documents relating thereto (collectively, the
"Solicitation Documents"), to the holders of Seller OP Units. Seller Partnership
and Parent shall consult and cooperate with each other in the preparation of the
Solicitation Documents. All mailings to the holders of Seller OP Units in
connection with the Partnership Merger, including the Solicitation Documents,
shall be subject to the prior review, comment and approval of Parent (such
approval not to be unreasonably withheld or delayed).
(c) Parent on the one hand, and Seller Partnership, on the
other hand, shall each advise the other promptly if, prior to the Closing Date,
it obtains knowledge of any facts that would make it necessary to amend the
Information Statement, Consent Solicitation Statement or any of the Additional
Filings or Solicitation Documents in order to render the statements therein not
false or misleading or to comply with applicable law. Seller Partnership and
Parent shall promptly amend or supplement any information in such documents if
and to the extent that such information has become false or misleading, and
Seller Partnership shall take all steps necessary to disseminate the amended
documents or supplements to the holders of Seller Common OP Units, in each case,
as and to the extent required by applicable law.
ARTICLE 5
CONDITIONS TO CONSUMMATION OF THE PARTNERSHIP MERGER
Section 5.1 Conditions to Each Party's Obligations to Effect the
Partnership Merger. The respective obligations of each party hereto to effect
the Partnership Merger is subject to the satisfaction on or prior to the Closing
Date of each of the following conditions, any and all of which may be waived in
whole or in part by the parties hereto with respect to such party's conditions,
to the extent permitted by applicable law:
(a) Conditions to the Merger. All of the conditions to the
closing of the Merger shall have been satisfied or waived in accordance with the
terms of the Merger Agreement (other than those set forth in Section 6.2(h) of
the Merger Agreement).
(b) Unitholders' Consent. The Seller Partner Approval shall
have been obtained;
15
(c) No Injunctions or Restraints. No temporary restraining
order, preliminary or permanent injunction or other order issued by any court of
competent jurisdiction or other legal restraint or prohibition preventing the
consummation of the Partnership Merger or any of the other transactions
contemplated hereby shall be in effect; and
(d) HSR Act. All applicable waiting periods (and any
extensions thereof) under the HSR Act shall have expired or otherwise been
terminated.
Section 5.2 Conditions to Seller General Partner's and the Seller
Partnership's Obligations to Effect the Partnership Merger. The obligation of
Seller General Partner and the Seller Partnership to effect the Partnership
Merger is also subject to the satisfaction (or waiver by Seller General Partner
and the Seller Partnership) on or prior to the Closing Date of each of the
following additional conditions:
(a) Accuracy of Representations and Warranties. The
representations and warranties of each of Parent, Sub and Buyer Operating LLC
set forth in this Agreement (i) that are qualified as to Parent Material Adverse
Effect shall be true and correct and (ii) that are not so qualified shall be
true and correct in all material respects, as of the date of this Agreement and
as of the Closing Date, in each case as though made on and as of the Closing
Date, except to the extent the representation or warranty is expressly limited
by its terms to another date, in which case such representation or warranty
shall be true and correct (if qualified as to Parent Material Adverse Effect) or
true and correct in all material respects (if not so qualified) only as of such
specific date.
(b) Compliance with Covenants. Each of Parent, Sub and Buyer
Operating LLC shall have performed in all material respects all obligations and
agreements, and complied in all material respects with covenants, contained in
this Agreement to be performed or complied with by it prior to or as of the
Closing Date.
(c) Officer's Certificate. Seller General Partner and the
Seller Partnership shall have received a certificate of Parent, dated as of the
Closing Date, signed by an executive officer of Parent to evidence satisfaction
of the conditions set forth in Sections 5.2(a) and (b).
Section 5.3 Conditions to Parent's, Sub's and Buyer Operating LLC's
Obligations to Effect the Partnership. The obligation of Parent, Sub and Buyer
Operating LLC to effect the Partnership Merger is also subject to the
satisfaction (or waiver by Parent, Sub and Buyer Operating LLC) at or prior to
the Closing Date of each of the following additional conditions:
(a) Accuracy of Representations and Warranties. The
representations and warranties of each of Seller General Partner and the Seller
Partnership set forth in this Agreement (i) that are qualified as to Seller
Material Adverse Effect shall be true and correct and (ii) that are not so
qualified shall be true and correct in all material respects, as of the date of
this Agreement and as of the Closing Date, in each case as though made on and as
of the Closing Date, except to the extent the representation or warranty is
expressly limited by its terms to another date, in which case such
representation or warranty shall be true and correct (if qualified as to Seller
Material Adverse Effect) or true and correct in all material respects (if not so
qualified) only as of such specific date.
16
(b) Compliance with Covenants. Each of Seller General Partner
and the Seller Partnership shall have performed in all material respects all
obligations and agreements, and complied in all material respects with
covenants, contained in this Agreement to be performed or complied with by it
prior to or as of the Closing Date.
(c) Officer's Certificate. Parent, Sub and Buyer Operating LLC
shall have received a certificate of Seller General Partner, dated as of the
Closing Date, signed by an executive officer of Seller General Partner to
evidence satisfaction of the conditions set forth in Sections 5.3(a) and (b).
(d) Seller Partnership Redemption. Seller Partnership shall
have redeemed from Seller certain outstanding Seller OP Units in exchange for
certain assets held by the Seller Partnership in accordance with the terms set
forth on Exhibit A to the Merger Agreement.
ARTICLE 6
TERMINATION
Section 6.1 Termination. This Agreement shall terminate, without any
further action on the part of the parties hereto, upon the termination of the
Merger Agreement in accordance with its terms. This Agreement may be terminated
and the transactions contemplated hereby may be abandoned at any time prior to
the Closing Date by the mutual written consent of the parties hereto.
Section 6.2 Procedure for and Effect of Termination. If this Agreement
is terminated as provided herein, no party hereto shall have any liability or
further obligation to any other party under the terms of this Agreement.
ARTICLE 7
MISCELLANEOUS
Section 7.1 Amendment and Modification. Subject to applicable law, this
Agreement may be amended, modified or supplemented only by a written agreement
signed by each of the parties hereto at any time prior to the Closing Date with
respect to any of the terms contained herein; provided, however, that after this
Agreement is adopted by the holders of Seller Common OP Units, no such amendment
shall be made which requires the approval of such holders.
Section 7.2 Waiver of Compliance; Consents. Any failure of Parent, Sub
or Buyer Operating LLC, on the one hand, or Seller General Partner or the Seller
Partnership, on the other hand, to comply with any obligation, covenant,
agreement or condition herein may, subject to Section 7.1, be waived by Parent,
Sub and Buyer Operating LLC or Seller General Partner and the Seller
Partnership, respectively, only by a written instrument signed by the party
granting such waiver, but such waiver or failure to insist upon strict
compliance with such obligation, covenant, agreement or condition shall not
operate as a waiver of, or estoppel with respect to, any subsequent or other
failure. Whenever this Agreement requires or permits consent by or on behalf of
any party hereto, such consent shall be given in writing in a manner consistent
with the
17
requirements for a waiver of compliance as set forth in this Section 7.2 and in
Section 7.1.
Section 7.3 Survival. The respective representations and warranties of
Parent, Sub and Buyer Operating LLC and Seller General Partner and the Seller
Partnership contained herein shall not survive the Closing hereunder.
Section 7.4 Notices. All notices, requests, claims, demands and other
communications under this Agreement shall be in writing and shall be delivered
personally, sent by overnight courier (providing proof of delivery) to the
parties or sent by telecopy (providing confirmation of transmission) at the
following addresses or telecopy numbers (or at such other address or telecopy
number for a party as shall be specified by like notice):
(a) if to Parent, Sub or Buyer Operating LLC, to:
SHP Acquisition, L.L.C. or SHP OP, L.L.C.
c/o Sunstone Hotel Properties, Inc.
000 Xxxxx Xxxxxxxx
Xxx Xxxxxxxx, XX 00000
Attention: Xxxxxx X. Alter
Fax: (000) 000-0000
and to:
XXX Xxxxxxxxxxx, X.X.X. xx XXX XX, X.X.X.
c/x Xxxxxxxxx Real Estate Partners
000 Xxxxxxxxx Xxxxxx
Xxxxx 0000
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxxx Xxxx
Fax: (000) 000-0000
with a copy to:
Xxxxxxx Xxxxxxx & Xxxxxxxx
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, XX 00000-0000
Attention: Xxxxxxx Xxxxxxxxx, Esq.
Xxxxx X. Xxxxxxx, Esq.
Fax: (000) 000-0000
and
Battle Xxxxxx LLP
18
00 Xxxx 00xx Xxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxx X. Xxxxxxx, Esq.
Xxxxx Xxxxxxxxxxx, Esq.
Fax: (000) 000-0000
(b) if to Seller General Partner or Seller Partnership,
to:
Sunstone Hotel Investors, Inc.
000 Xxxxx Xxxxxxxx
Xxx Xxxxxxxx, XX 00000
Attention: Chief Operating Officer
Fax: (000) 000-0000
with a copy to:
Altheimer & Xxxx
Xxx Xxxxx Xxxxxx Xxxxx
Xxxxx 0000
Xxxxxxx, XX 00000
Attention: Xxxxxxx Xxxxxx, Esq.
Fax: (000) 000-0000
All notices shall be deemed given only when actually received.
Section 7.5 Assignment. This Agreement and all of the provisions hereof
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and permitted assigns, but neither this Agreement nor any
of the rights, interests or obligations hereunder shall be assigned by any of
the parties hereto without the prior written consent of the other parties.
Section 7.6 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF DELAWARE, REGARDLESS OF
THE LAWS THAT MIGHT OTHERWISE GOVERN UNDER APPLICABLE PRINCIPLES OF CONFLICT OF
LAWS THEREOF.
Section 7.7 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
Section 7.8 Enforcement. The parties agree that irreparable harm would
occur in the event that any of the provisions of this Agreement were not
performed by any party in accordance with their specific terms or were otherwise
breached. It is accordingly agreed that any party shall be entitled to an
injunction or injunctions to prevent or redress breaches of this Agreement by
any other party and to enforce specifically the terms and provisions of this
Agreement in any federal court located in Delaware or in Chancery Court in
Delaware, this being in addition to any other remedy to which they are entitled
at law or in equity. Notwithstanding the foregoing, the parties agree that no
party shall be entitled to a judgment specifically enforcing
19
the obligations of any other party to consummate the Partnership Merger. The
parties agree that the provisions of Section 7.2 of the Merger Agreement
constitute the exclusive remedy of any party for the loss suffered by such party
as a result of the failure of the Partnership Merger to be consummated, and no
party shall have any liability to any other party as a result of the failure of
the Partnership Merger to be consummated, any breach of this Agreement or
otherwise except as provided in Section 7.2 of the Merger Agreement. In
addition, each of the parties hereto (a) consents to submit itself (without
making such submission exclusive) to the personal jurisdiction of any federal
court located in Delaware or Chancery Court located in Delaware in the event any
dispute arises out of this Agreement or any of the transactions contemplated by
this Agreement and (b) agrees that it will not attempt to deny or defeat such
personal jurisdiction by motion or other request for leave from any such court.
Section 7.9 Interpretation. The article and Section headings contained
in this Agreement are solely for the purpose of reference, are not part of the
agreement of the parties and shall not in any way affect the meaning or
interpretation of this Agreement.
Section 7.10 Entire Agreement. The Merger Agreement (including the
schedules, exhibits, documents or instruments referred to herein), this
Agreement, the Seller Disclosure Letter and the Parent Disclosure Letter
together embody the entire agreement and understanding of the parties hereto in
respect of the subject matter hereof and thereof and supersede all prior
agreements and understandings, both written and oral, among the parties, or
between any of them, with respect to the subject matter hereof and thereof.
Section 7.11 No Third Party Beneficiaries. This Agreement is not
intended to, and does not, create any rights or benefits of any party other than
the parties hereto.
Section 7.12 Severability. In the event that any one or more of the
provisions contained in this Agreement or in any other instrument referred to
herein, shall, for any reason, be held to be invalid, illegal or unenforceable
in any respect, such invalidity, illegality or unenforceability shall not affect
any other provision of this Agreement or any other such instrument.
Section 7.13 Tax Election. The parties hereby agree that an election
pursuant to Section 754 of the Internal Revenue Code shall be made for the
Seller Partnership and each partnership which is a subsidiary of the Seller
Partnership (or shall be in effect) with respect to any transfers of interests
in the Seller Partnership pursuant to the Merger and the Partnership Merger.
20
IN WITNESS WHEREOF, Parent, Sub, Buyer Operating LLC, Seller General
Partner and the Seller Partnership have caused this Agreement and Plan of Merger
to be signed by a person duly authorized to do so as of the date first above
written.
SHP ACQUISITION L.L.C.
By: /s/ Xxxx Xxxxxxxxxx
-----------------------------
Name: /s/ Xxxx Xxxxxxxxxx
Title: Manager
SHP OP, L.L.C.
By: /s/ Xxxxxxxx X. Xxxx
------------------------------
Name: Xxxxxxxx X. Xxxx
Title: Authorized Person
SHP PROPERTIES CORP.
By: /s/ Xxxxxxxx X. Xxxx
-------------------------------
Name: Xxxxxxxx X. Xxxx
Title: Authorized Person
SUNSTONE HOTEL INVESTORS, INC.
By: /s/ R. Xxxxxxxx Xxxxxxx
--------------------------------
Name: R. Xxxxxxxx Xxxxxxx
Title: Chief Operating Officer
SUNSTONE HOTEL INVESTORS, L.P.
By: SUNSTONE HOTEL INVESTORS, INC.
By: /s/ R. Xxxxxxxx Xxxxxxx
----------------------------------
Name: R. Xxxxxxxx Xxxxxxx
Title: Auhorized Person
21
Exhibit A
LIMITED LIABILITY COMPANY AGREEMENT
OF
SHP OP, L.L.C.
This LIMITED LIABILITY COMPANY AGREEMENT (this "Agreement") of SHP
OP, L.L.C. is made as of June 12, 1999 by SHP Acquisition, L.L.C., a Delaware
limited liability company ("SHP Acquisition") and SHP Properties Corp., a
Delaware corporation ("SHP Properties" and, collectively with SHP Acquisition,
the "Original Members").
The Original Member hereby duly adopts this Agreement pursuant to
and in accordance with the Delaware Limited Liability Company Act (6 Del.C.
Section 18-101, et seq.), as amended from time to time (the "Act"), and hereby
agrees as follows:
1. Name; Certificate of Formation. The name of the limited liability
company is SHP OP, LLC. (the "Company"). The Certificate of Formation of the
Company dated June 29, 1999 was filed in the office of the Secretary of State of
the State of Delaware on June 29, 1999.
2. Purpose. The Company is formed for the object and purpose of, and
the nature of the business to be conducted and promoted by the Company is,
engaging in any lawful act or activity for which limited liability companies may
be formed under the Act and engaging in any and all activities necessary or
incidental to the foregoing.
3. Member Percentages. The percentage interest of each of the
Original Members as of the date of this Agreement is set forth on Schedule A
hereto. If one or more new members are admitted in accordance with the terms
hereof, or if there are any other changes this Agreement will be amended and the
percentage interest of each Member (the "Membership Percentage") set forth on a
schedule hereto.
4. Designated Agent for Service of Process. The Company shall
maintain a registered office and a designated and duly qualified agent for the
service of process on the Company in the State of Delaware.
5. Managers. The Original Members hereby appoint the following named
persons to be managers of the Company (the "Managers") and to serve with the
title indicated:
22
NAME TITLE
---- -----
Xxxxxx X. Alter Manager
Xxxx Xxxxxxxxxx Manager
Xxxx Xxxxx Manager
Xxxxxxxx X. Xxxx Manager
6. Powers. The business and affairs of the Company shall be managed
by the Original Members and such other persons as may become members of the
Company from time to time in accordance with the provisions of this Agreement
(together with the Original Members, the "Members"). The Members shall have the
power to do any and all acts necessary or convenient to or for the furtherance
of the purposes described herein, including all powers, statutory or otherwise,
possessed by members under the laws of the State of Delaware. Each of the
Managers is hereby each designated as an authorized person, within the meaning
of the Act, to execute, deliver and file the certificate of formation of the
Company (and any amendments and/or restatements thereof) and any other
certificates (and any amendments and/or restatements thereof) necessary for the
Company to qualify to do business in a jurisdiction in which the Company may
wish to conduct business.
7. Management. The Managers shall have the sole and exclusive power
and authority to act for and bind the Company. The Original Members shall have
the exclusive right to manage the business and affairs of the Company and may
delegate such management rights, powers, duties and responsibilities to one or
more Managers or such other person or persons designated by them as they may
determine, provided that such delegation by the Original Members shall not cause
either of the Original Members to cease being a Member. Pursuant to its
discretion to do so under this Section 7, the Original Members hereby delegate
to the Managers the nonexclusive power and authority to act as an agent of the
Company and, in such capacity, to bind the Company in the ordinary course of the
Company's business and to execute any and all documents to be signed by the
Company. Notwithstanding the foregoing delegation of power, no Manager shall
have the authority to make any distributions or sell any assets of the Company
without the consent of each of the Original Members.
8. Dissolution. The Company shall dissolve, and its affairs shall be
wound up upon the first to occur of the following: (a) the written consent of
the Original Members, (b) December 31, 2049, (c) the retirement, resignation,
expulsion, insolvency, bankruptcy or dissolution of any Member or the occurrence
of any other event which terminates the continued membership of any of the
Original Members in the Company unless the business of the Company is continued
by consent of each of the Original Members within 90 days following the
occurrence of any such event, or (d) the entry of a decree of judicial
dissolution under Section 18-802 of the Act.
23
9. Capital Contributions. The Members shall make capital
contributions to the Company from time to time, in cash, securities or other
property, in amounts and at times as determined by the Original Members, and in
proportion to their respective Membership Percentages.
10. Allocation of Profits and Losses. The Company's profits and
losses shall be allocated among the Members in proportion to their respective
Membership Percentages.
11. Distributions. Distributions shall be made to the Members at the
times and in the amounts determined by the Original Members. Such distributions
shall be allocated among the Members in proportion to their respective
Membership Percentages.
12. Assignments; New Members. No Member may assign in whole or in
part its limited liability company interest without the consent of each other
Member, which consent may be granted or withheld in such Member's sole and
absolute discretion. The Members may admit one or more new Members at any time
upon such terms and conditions as they shall unanimously agree.
13. Resignation. No Member may resign from the Company without the
consent of each of the Original Members; provided, however, that each of the
Original Members may resign from the Company, thereby causing its dissolution,
without the consent of any other Member.
14. Liability of Member; Indemnification. The Members shall not have
any liability to the Company, any other Members or any third party for the
obligations or liabilities of the Company except to the extent required by the
Act. The Company shall, to the full extent permitted by applicable law,
indemnify and hold harmless each Member and each Manager against liabilities
incurred by it in connection with any action, suit or proceeding to which it may
be made a party or otherwise involved or with which such Member or such Manager
shall be threatened by reason of its being a Member or Manager or while acting
as a Member or Manager on behalf of the Company or in its interest.
15. Governing Law. This Agreement shall be governed by, and
construed under, the laws of the State of Delaware, all rights and remedies
being governed by said laws.
16. Proposed Transactions. (a) The Original Members hereby deem it
advisable and in the best interest of the Company that the Company enter into
the Merger Agreement, dated as of July 12, 1999, among the Company, SHP
Acquisition, SHP Properties and Sunstone Hotel Investors, L.P., a Delaware
limited partnership (the "Merger Agreement"), a form of which has been presented
to the Members, and the transactions contemplated thereby, be, and each of them
hereby is, in all respects authorized and approved; and the Managers are, and
each of them hereby is, authorized to execute and deliver on behalf of the
Company the Merger Agreement with such changes therein and additions or
amendments thereto, and any and all ancillary documents (collectively with the
Merger Agreement, the "Transaction Agreements"), in
24
such form as the Manager or Manager executing any of the Transaction Agreements
shall approve, such Manager's execution thereof to be conclusive evidence of
such approval.
(b) All actions heretofore taken by any Member, any Manager or an
authorized person within the meaning of the Act in connection with any matter
referred to herein are hereby approved, ratified and confirmed in all respects.
(c) The Managers are, and each of them hereby is, authorized, and
directed to do and perform, or cause to be done and performed, all such acts,
deeds and things and to make, execute and deliver, or cause to be made, executed
and delivered, all such agreements, undertakings, documents, instruments,
certificates and other papers and instruments, in the name and on behalf of the
Company or otherwise as each such Manager may deem necessary or appropriate to
effectuate or carry out fully the purpose and intent of the Transaction
Agreements and any of the transactions contemplated thereby.
17. Amendment. This Agreement may only be amended by a writing duly signed
by each of the Original Members, except that any such amendment which directly
and materially affects any Member shall require the consent of each such Member
so affected.
18. Counterparts. This Agreement may be executed in any number of
counterparts, and each such counterpart shall for all purposes be deemed an
original, and all such counterparts shall together constitute but one and the
same agreement.
19. Entire Agreement. This Agreement constitutes the entire agreement
among the Members and supersedes all prior agreements and understandings among
the Members with respect to the matters contemplated hereby. There are no
restrictions, warranties, covenants, agreements, promises or undertakings other
than those expressly set forth in this Agreement.
25
IN WITNESS WHEREOF, the undersigned, intending to be legally bound
hereby, have duly executed this Limited Liability Company Agreement as of the
date first written above.
SHP ACQUISITION, L.L.C.
By /s/ Xxxx Xxxxxxxxxx
------------------------------
Name: Xxxx Xxxxxxxxxx
---------------------
Title: Manager
---------------------
SHP PROPERTIES CORP.
By /s/ Xxxxxxxx X. Xxxx
----------------------------
Name: Xxxxxxxx X. Xxxx
--------------------
Title: Authorized Person
--------------------
26
SCHEDULE A
Member Percentage Interest
------ -------------------
SHP Acquisition, L.L.C. 99%
SHP Properties Corp. 1%
27
EXHIBIT B
SECOND AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
OF
SUNSTONE HOTEL INVESTORS, L.P.
28
TABLE OF CONTENTS
PAGE
----
ARTICLE I - DEFINED TERMS.................................................................. 1
ARTICLE II - PARTNERSHIP CONTINUATION AND IDENTIFICATION................................... 11
2.1 Organization................................................................ 11
2.2 Name........................................................................ 11
2.3 Registered Office and Agent; Principal Office............................... 12
2.4 Partners.................................................................... 12
2.5 Term and Dissolution........................................................ 12
2.6 Filing of Certificate and Perfection of Limited Partnership................. 13
ARTICLE III - PURPOSE OF THE PARTNERSHIP................................................... 13
3.1 Business.................................................................... 13
3.2 Powers...................................................................... 14
3.3 Partnership Only for Purposes Specified..................................... 14
ARTICLE IV - CAPITAL CONTRIBUTIONS AND ACCOUNTS............................................ 14
4.1 Capital Contributions....................................................... 14
4.2 Additional Capital Contributions and Issuances of Additional Partnership
Interests................................................................... 15
4.3 Company Loans............................................................... 20
4.4 Capital Accounts............................................................ 21
4.5 Percentage Interests........................................................ 21
4.6 No Interest on Contributions................................................ 21
4.7 Return of Capital Contributions............................................. 21
4.8 No Third Party Beneficiary.................................................. 22
4.9 No Preemptive Rights........................................................ 22
ARTICLE V - PROFITS AND LOSSES: DISTRIBUTIONS.............................................. 22
5.1 Allocation of Profit and Loss............................................... 22
5.2 Distribution of Cash........................................................ 25
5.3 REIT Distribution Requirements.............................................. 25
5.4 No Right to Distributions in Kind........................................... 25
5.5 Limitations on Return of Capital Contributions.............................. 25
5.6 Distributions upon Liquidation.............................................. 25
5.7 Substantial Economic Effect................................................. 26
5.8 Amounts Withheld............................................................ 26
ARTICLE VI - RIGHTS, OBLIGATIONS AND POWERS OF THE GENERAL
PARTNERSHIP........................................................................ 27
6.1 Management of the Partnership............................................... 27
6.2 Delegation of Authority..................................................... 30
6.3 Indemnification and Exculpation of Indemnitees.............................. 30
i
29
6.4 Liability of the General Partner............................................ 31
6.5 Expenditures by Partnership................................................. 32
6.6 Outside Activities; Redemption Tender Offer of REIT Shares.................. 32
6.7 Employment or Retention of Affiliates....................................... 32
6.8 Company Participation....................................................... 33
ARTICLE VII - CHANGES IN GENERAL PARTNER................................................... 33
7.1 Transfer of the General Partner's Partnership Interest...................... 33
7.2 Admission of a Substitute or Successor General Partner...................... 34
7.3 Effect of Bankruptcy, Withdrawal, Death or Dissolution of a General
Partner..................................................................... 35
7.4 Purchase of Partnership Units............................................... 36
ARTICLE VIII - RIGHTS AND OBLIGATIONS OF THE LIMITED PARTNERS.............................. 36
8.1 Management of the Partnership............................................... 36
8.2 Power of Attorney........................................................... 36
8.3 Limitation on Liability of Limited Partners................................. 37
8.4 Ownership by Limited Partner of Corporate General Partner or Affiliate...... 37
8.5 Redemption Right............................................................ 38
8.6 Registration................................................................ 41
8.7 Meetings of the Partners.................................................... 45
ARTICLE IX - TRANSFERS OF LIMITED PARTNERSHIP INTERESTS.................................... 46
9.1 Purchase for Investment..................................................... 46
9.2 Restrictions on Transfer of Limited Partnership Interests and Redemption
Shares...................................................................... 47
9.3 Admission of Substitute Limited Partner..................................... 49
9.4 Rights of Assignees of Partnership Interests................................ 50
9.5 Effect of Bankruptcy, Death, Incompetence or Termination of a Limited
Partner..................................................................... 50
9.6 Joint Ownership of Interests................................................ 51
9.7 Assignment of all Partnership Units......................................... 51
9.8 Limitation on Transfer of Partnership Units and Other Rights to Avoid
Adverse Tax Effects......................................................... 51
ARTICLE X - BOOKS AND RECORDS: ACCOUNTING: TAX MATTERS..................................... 52
10.1 Books and Records........................................................... 52
10.2 Custody of Partnership Funds: Bank Accounts................................. 52
10.3 Fiscal and Taxable Year..................................................... 53
10.4 Annual Tax Information and Report........................................... 53
10.5 Tax Matters Partner; Tax Elections; Special Basis Adjustments............... 53
10.6 Reports to Limited Partners................................................. 53
10.7 Title to Partnership Assets................................................. 54
10.8 Reliance by Third Parties................................................... 54
10.9 Withholding................................................................. 55
ii
30
ARTICLE XI - AMENDMENT OF AGREEMENT........................................................ 56
ARTICLE XII - GENERAL PROVISIONS........................................................... 56
12.1 Notices..................................................................... 56
12.2 Survival of Rights.......................................................... 57
12.3 Additional Documents........................................................ 57
12.4 Severability................................................................ 57
12.5 Entire Agreement............................................................ 57
12.6 Pronouns and Plurals........................................................ 57
12.7 Headings.................................................................... 57
12.8 Counterparts................................................................ 57
12.9 Waiver...................................................................... 57
12.10 Applicable Law.............................................................. 57
12.11 Invalidity of Provisions.................................................... 58
12.12 No Rights as Stockholders................................................... 58
12.13 Partition................................................................... 58
12.14 No Third-Party Rights Created Hereby........................................ 58
EXHIBITS
EXHIBIT A - Notice of Exercise of Redemption Right
EXHIBIT B - Certificate(s) of Designation of Preferred Partnership Units
iii
31
SECOND AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
OF SUNSTONE HOTEL INVESTORS, L.P.
This Second Amended and Restated Agreement of Limited Partnership
(this "Agreement") of Sunstone Hotel Investors, L.P. dated as of October 14,
1997, is entered into by and among Sunstone Hotel Investors, Inc., a Maryland
corporation, in its individual capacity (the "Company") and in its capacity as
the general partner of the Partnership (the "General Partner") and each of the
limited partners of the Partnership (the "Limited Partners"), together with any
other Persons who become Partners in the Partnership as provided herein.
R E C I T A L S:
A. WHEREAS, the General Partner and certain Limited Partners executed
that certain First Amended and Restated Agreement of Limited Partnership dated
as of October 16, 1995 (the "First Restated Agreement"), amending and restating
that certain Limited Partnership Agreement dated as of September 22, 1994 (the
"Original Agreement").
B. WHEREAS, the First Restated Agreement was amended by fourteen
amendments thereto.
C. WHEREAS, the parties hereto have determined it to be in their mutual
best interests to amend and restate the First Restated Agreement to incorporate
the fourteen amendments thereto and to make certain other changes to the First
Restated Agreement.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing, of mutual covenants
between the parties hereto, and of other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree to amend the First Restated Agreement to read in its entirety as follows:
ARTICLE I
DEFINED TERMS
The following defined terms used in this Agreement shall have the
meanings specified below:
"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 this Partnership
as a Limited Partner pursuant to Section 4.2 hereof and who is shown as such on
the Unitholder Ledger.
1
32
"ADMINISTRATIVE EXPENSES" means (i) all administrative and operating
costs and expenses incurred by the Partnership, (ii) those administrative costs
and expenses of the General Partner, including any salaries or other payments to
directors, officers and/or employees of the General Partner, and any accounting
and legal expenses of the General Partner, which expenses, the Partners have
agreed, are expenses of the Partnership and not the General Partner, and (iii)
to the extent not included in clause (ii) above, REIT Expenses; provided,
however, that Administrative Expenses shall not include any administrative costs
and expenses incurred by the Company that are attributable to Properties owned
by the Company directly, if any.
"AFFILIATE" means (i) any Person that, directly or indirectly, controls
or is controlled by or is under common control with such Person, (ii) any other
Person that owns, beneficially, directly or indirectly, 5% or more of the
outstanding capital stock, shares or equity interests of such Person, or (iii)
any officer, director, employee, partner or trustee of such Person or any Person
controlling, controlled by or under common control with such Person (excluding
trustees and persons serving in similar capacities who are not otherwise an
Affiliate of such Person). For the purposes of this definition, "control"
(including the correlative meanings of the terms "controlled by" and "under
common control with"), as used with respect to any Person, shall mean the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Person, through the ownership
of voting securities, partnership interests or other equity interests.
"AGREED VALUE" means the fair market value of a Partner's non-cash
Capital Contribution as of the date of such contribution as agreed to by the
Partners making such contribution and the General Partner. For purposes of this
Partnership Agreement, the Agreed Value of a Partner's non-cash Capital
Contribution shall be equal to the number of Partnership Units received by such
Partner in consideration for the conveyance or exchange of a Hotel or an
interest in a Hotel, or in connection with the merger of a limited liability
company, corporation or a partnership of which such Person is a member,
shareholder or partner with and into the Partnership, or for any other non-cash
asset so contributed, multiplied by the Public Offering Price or, if the
contribution is or was made after the date of the closing of the Initial
Offering, the Market Price; provided, that if there is no Market Price, the
price agreed to by the Partners making such contribution and the General
Partner. For Partners who contributed assets to the Partnership prior to the use
of the Unitholder Ledger, the names and addresses of such Partners, number of
Partnership Units issued to each Partner and the Agreed Value of non-cash
Capital Contributions was as set forth on Exhibit "A" to the First Restated
Agreement. After the introduction of the Unitholder Ledger, the names and
addresses of the Partners and the number of Partnership Units issued to each
Partner in exchange for assets contributed have been recorded in the Unitholder
Ledger.
"AGREEMENT" means this Second Amended and Restated Agreement of Limited
Partnership, as it may be further amended, supplemented or restated from time to
time.
"ARTICLES OF INCORPORATION" means the Articles of Incorporation of the
General Partner originally filed in the State of Maryland on September 21, 1994,
as amended and restated on September 23, 1994, as amended on November 9, 1994,
June 19, 1995, August 14, 1995 and May 2, 1997, and as further amended or
restated from time to time.
2
33
"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.
"BOOK VALUE" means, with respect to any asset, the asset's adjusted
basis for federal income tax purposes, except as follows:
(a) The initial Book Value of any asset contributed by a Partner
to the Partnership shall be the gross fair market value of such asset (not
reduced by any associated liabilities), as agreed to by the Partners;
(b) The Book Value of the Properties of the Partnership shall be
adjusted to equal their respective gross fair market values as provided in
Section 4.4 hereof; and
(c) The Book Value of any Property distributed to a Partner shall
be adjusted to equal the gross fair market value of such asset on the date of
distribution as determined by the General Partner.
The Book Value of any Property which has been established or adjusted to reflect
gross fair market value hereunder shall thereafter be adjusted by the
Depreciation taken into account with respect to such asset for purposes of
computing net income or net loss.
"BUSINESS DAY" means any day except a Saturday, Sunday or other day on
which commercial banks in New York, New York or Orange County, California are
authorized or required by law to close.
"CAPITAL ACCOUNT" has the meaning provided in Section 4.4 hereof.
"CAPITAL CONTRIBUTION" means the total amount of capital contributed or
agreed to be contributed, as the context requires, to the Partnership by each
Partner pursuant to the terms of the Agreement. Any reference to the Capital
Contribution of a Partner shall include the Capital Contribution made by a
predecessor holder of the Partnership Interest of such Partner. The paid-in
Capital Contribution shall mean the cash amount or the Agreed Value of other
assets actually contributed by each Partner to the capital of the Partnership.
"CASH AMOUNT" means an amount of cash per Partnership Unit equal to the
value of the REIT Shares Amount on 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. The value of the REIT Shares Amount shall be the Market
Price.
"CERTIFICATE" means the Certificate of Limited Partnership relating to
the Partnership together with any instrument or document that is required under
the laws of Delaware or any other jurisdiction in which the Partnership conducts
business, to be signed by the Partners of the Partnership (either by themselves
or pursuant to the power-of-attorney granted to the General Partner in Section
8.2 hereof) and filed for recording in the appropriate public offices within
Delaware or such other jurisdiction to perfect or maintain the Partnership as a
limited partnership, to effect the
3
34
admission, withdrawal, or substitution of any Partner of the Partnership, or to
protect the limited liability of the Limited Partners as limited partners under
the laws of Delaware or such other jurisdiction.
"CERTIFICATE OF DESIGNATION" means, for a particular class of Preferred
Partnership Units, the description of the rights, preferences and privileges to
which the holders of Preferred Partnership Units of such class are entitled. For
each class of Preferred Partnership Units that may be issued, a Certificate of
Designation shall be attached hereto as Exhibit "B" and shall be incorporated by
reference herein.
"CODE" means the Internal Revenue Code of 1986, as amended and in effect
from time to time, or any successor statute thereto, 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.
"COMMISSION" means the U.S. Securities and Exchange Commission.
"COMMON PARTNERSHIP UNITS" means a fractional, undivided share of the
Partnership Interests of all Partners issued hereunder, excluding any Preferred
Partnership Units.
"COMMON UNITHOLDER" means a holder of Common Partnership Units.
"COMPANY" means Sunstone Hotel Investors, Inc., a Delaware corporation,
in its capacity other than as the General Partner or Limited Partner.
"COMPANY CONTRIBUTION" has the meaning provided in Section 4.2(a)(ii)
hereof.
"CONVERSION FACTOR" means one (1), provided that in the event that the
General Partner (i) declares or pays a dividend on its outstanding REIT Shares
in REIT Shares or makes a distribution to all holders of its outstanding REIT
Shares in REIT Shares, (ii) subdivides its outstanding REIT Shares, or (iii)
combines its outstanding REIT Shares into a smaller number of REIT Shares, the
Conversion Factor shall be adjusted by multiplying the Conversion Factor by a
fraction, the numerator of which shall be the number of REIT Shares issued and
outstanding on the record date for such dividend, distribution, subdivision or
combination (assuming for such 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 REIT Shares (determined without the above
assumption) issued and outstanding on such date. Any adjustment to the
Conversion Factor shall become effective immediately after the effective date of
such event retroactive to the record date, if any, for such event.
"DEPRECIATION" means, for each accounting period, an amount equal to the
depreciation, amortization or other cost recovery deduction allowable with
respect to an asset for such period, except that if the Book Value of an asset
differs from its adjusted basis for federal income tax purposes during such
accounting period, Depreciation shall be an amount which bears the same ratio to
Book Value as the federal income tax depreciation, amortization, or other cost
recovery deduction
4
35
for such period bears to such beginning adjusted tax basis; provided, however,
that if the adjusted basis for federal income tax purposes of an asset at the
beginning of such accounting period is zero, Depreciation shall be determined
with reference to such asset as if the adjusted basis of the asset for federal
income tax purposes were equal to the Book Value and using any reasonable method
of cost recovery selected by the General Partner.
"DIRECTORS' PLAN" means the 1994 Directors' Plan of the Company relating
to the issuance of REIT shares and the grant of options to acquire REIT Shares
and similar rights to directors of the Company.
"DIVIDEND REINVESTMENT PLAN" means the Dividend Reinvestment and Stock
Purchase Plan of the Company pursuant to which certain eligible persons may
purchase REIT Shares directly from the Company, and holders of REIT Shares may
elect to have some or all of their dividends on their REIT Shares reinvested to
purchase additional REIT Shares from the Company.
"ELIGIBLE PERSON" has the meaning provided in Section 4.2(f) hereof.
"EVENT OF BANKRUPTCY" as to any Person means the filing of a petition
for relief as to such Person as debtor or bankrupt under the Bankruptcy Code of
1978 or similar provision of law of any jurisdiction (except if such petition is
contested by such Person and has been dismissed within ninety (90) days of
filing); insolvency or bankruptcy of such Person as finally determined by a
court proceeding; filing by such Person of a petition or application to
accomplish the same or for the appointment of a receiver or a trustee for such
Person or a substantial part of his assets; commencement of any proceedings
relating to such Person as a debtor under any other reorganization, arrangement,
insolvency, adjustment of debt or liquidation law of any jurisdiction, whether
now in existence or hereinafter in effect, either by such Person or by another,
provided that if such proceeding is commenced by another, such Person indicates
his approval of such proceeding, consents thereto or acquiesces therein, or such
proceeding is contested by such Person and has not been finally dismissed within
ninety (90) days of filing.
"FINANCIAL STATEMENTS" has the meaning provided in Section 10.6(a)
hereof.
"FUNDING LOAN" has the meaning provided in Section 4.3 hereof.
"GENERAL PARTNER" means Sunstone Hotel Investors, Inc., a Maryland
corporation and any Person who becomes a substitute or additional General
Partner as provided herein, and any of their successors as General Partner.
"GENERAL PARTNERSHIP INTEREST" means the Partnership Interest held by
the General Partner that is a general partnership interest representing a
fractional part of the Partnership Interests at any particular time, including
the right of such limited partner to any and all benefits to which such limited
partner may be entitled as provided in this Agreement and in the Act, together
with the obligations of such general partner to comply with provisions of this
Agreement and Act. A General Partner Interest may be expressed as a number of
Partnership Units.
5
36
"IMMEDIATE FAMILY MEMBER" has the meaning provided in Section
9.2(d)(iii) hereof.
"INCENTIVE RIGHTS" has the meaning provided in Section 4.2(f)(iii)
hereof.
"INDEMNIFIED PARTY" has the meaning provided in Section 8.6(e) hereof.
"INDEMNIFYING PARTY" has the meaning provided in Section 8.6(e) hereof.
"INDEMNITEE" means (i) any Person made a party to a proceeding by reason
of his status as (A) the General Partner or (B) a director or officer of the
Partnership or the General Partner, or (C) a party liable, pursuant to a loan
guarantee or otherwise, for any indebtedness of the Partnership or any
Subsidiary of the Partnership (including, without limitation, any indebtedness
which the Partnership or any Subsidiary of the Partnership has assumed or taken
assets subject to), and (ii) such other Persons (including Affiliates of the
General Partner or the Partnership) as the General Partner may designate from
time to time (whether before or after the event giving rise to potential
liability), in its sole and absolute discretion.
"INDEPENDENT DIRECTOR" has the meaning provided in the Articles of
Incorporation.
"INITIAL HOTELS" means the Hampton Inn-Denver (S.W.), the Hampton
Inn-Pueblo, Colorado, the Hampton Inn-Mesa, Arizona, the Hampton Inn,
Silverthorne, Colorado, the Hampton Inn, Arcadia, California, the Best Western,
Santa Fe, New Mexico, the Holiday Inn-Xxxxx, Colorado, the Holiday Inn-Steamboat
Springs, Colorado, the Holiday Inn-Provo, Utah, and the Courtyard by
Marriott-Fresno, California, and any other hotel contributed by an Additional
Limited Partner prior to the date of this Agreement.
"INITIAL OFFERING" means the initial offer and sale by the General
Partner and the purchase by the Underwriters (as defined in the prospectus for
such offering) of the shares of common stock of the General Partner for sale to
the public.
"LIMITED PARTNER" means any Person named as a Limited Partner on the
Unitholder Ledger, and any Person who becomes a Substitute 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 at any particular time, including the right of such Limited Partner to
any and all benefits to which such Limited Partner may be entitled as provided
in this Agreement and in the Act, together with the obligations of such Limited
Partner to comply with all the provisions of this Agreement and of the Act. A
Limited Partner Interest may be expressed as a number of Partnership Units.
"LIQUIDATOR" has the meaning provided in Section 8.2 hereof.
"LOSS" has the meaning provided in Section 5.1(f) hereof.
6
37
"MARKET PRICE" on any date shall mean the average of the Closing Price
for the five consecutive Trading Days ending on such date. The "Closing Price"
on any day shall mean the last reported sale price, regular way, or, in case no
such sale takes place on such day, the average of the closing bid and asked
prices, regular way, in either case as reported in the principal consolidated
transaction reporting system with respect to securities listed or admitted to
trading on the New York Stock Exchange, of the class of REIT Shares or REIT
Preferred Shares, or, if not, then listed or admitted to trading on the New York
Stock Exchange, as reported in the principal consolidated transaction reporting
system with respect to securities listed on the principal national securities
exchange on which such shares are listed or admitted to trading or, if such
shares are not then listed or admitted to trading on any national securities
exchange, the last quoted price, or if not so quoted, the average of the high
bid and low asked prices in the over-the-counter market, as reported by the
National Association of Securities Dealers, Inc. Automated Quotation System or,
if such system is no longer in use, the principal other automated quotations
system that may then be in use or, if such shares are not quoted by any such
organization, the average of the closing bid and asked prices as furnished by a
professional market marker making a market in such shares as selected in good
faith by the Board of Directors of the Company. "Trading Day" shall mean a day
on which the principal national securities exchange on which such REIT Shares or
REIT Preferred Shares are listed or admitted to trading is open for the
transaction of business or, if such shares are not listed or admitted to trading
on any national securities exchange, shall mean any day other than a Saturday, a
Sunday or a day on which banking institutions in the State of New York are
authorized or obligated by law or executive order to close.
"MINIMUM LIMITED PARTNERSHIP INTEREST" means the lesser of (i) 1 % or
(ii) if the total Capital Contributions to the Partnership exceeds $50 million,
1% divided by the ratio of the total Capital Contributions to the Partnership to
$50 million; provided, however, that the Minimum Limited Partnership Interest
shall not be less than 0.2% at any time.
"NEW SECURITIES" has the meaning provided in Section 4.2(a)(ii) hereof.
"NOTICE OF REDEMPTION" means the Notice of Exercise of Redemption Right
substantially in the form attached as Exhibit "A" hereto.
"OFFER" has the meaning provided in Section 7.1(c) hereof.
"PARTNER" means any General Partner or any Limited Partner, and
"PARTNERS" means collectively the General Partner and all of the Limited
Partners.
"PARTNER NONRECOURSE DEBT MINIMUM GAIN" has the meaning set forth in
Regulations Section 1.704-2(i). A Partner's share of Partner Nonrecourse Debt
Minimum Gain shall be determined in accordance with Regulations Section
1.704-2(i)(5).
"PARTNERSHIP" means the limited partnership formed under the Act and
pursuant to the Original Agreement, as amended and restated pursuant to the
First Restated Agreement and this Agreement and any successor partnership
thereto.
7
38
"PARTNERSHIP INTEREST" means an ownership interest in the Partnership
representing a Capital Contribution by either a Limited Partner or the General
Partner and includes any and all benefits to which the holder of such a
Partnership Interest may be entitled as provided in this Agreement, together
with all obligations of such Person to comply with the terms and provisions of
this Agreement or the Act. 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(d). In accordance with Regulations Section 1.704-2(d), the
amount of Partnership Minimum Gain is determined by first computing, for each
Partnership nonrecourse liability, any gain the Partnership would realize if it
disposed of the property subject to that liability for no consideration other
than full satisfaction of the liability, and then aggregating the separately
computed gains. A Partner's share of Partnership Minimum Gain shall be
determined in accordance with Regulations Section 1.704-2(g)(1).
"PARTNERSHIP RECORD DATE" means the record date established by the
General Partner for the distribution of Distributable Cash pursuant to Section
5.2 hereof, which record date shall be the same as the record date established
by the General Partner for a distribution to its stockholders of some or all of
its portion of such distribution.
"PARTNERSHIP UNIT" means a fractional, undivided share of the
Partnership Interests of all Partners issued at any time and from time to time
by the Partnership, consisting of either Common Partnership Units or Preferred
Partnership Units. The ownership of Partnership Units shall be evidenced by book
entry on the Unitholder Ledger maintained by the Transfer Agent that reflects
the issuance, redemption, exchange or conversion of Partnership Units. In the
absence of manifest error, the Unitholder Ledger shall be final, conclusive and
binding on all Limited Partners.
"PERCENTAGE INTEREST" means the percentage ownership interest in the
Partnership that each Partner, as determined by dividing the Partnership Units
owned by a Partner as of the date of determination by the total number of
Partnership Units then outstanding, as may be adjusted by Section 4.2 hereof.
The Percentage Interest of each Partner is set forth opposite its respective
name on the Unitholder Ledger.
"PERSON" means any individual, partnership, limited liability company,
corporation, joint venture, trust, association or other entity.
"PLEDGE" has the meaning provided in Section 9.2(a) hereof.
"PREFERRED UNIT" means a fractional, undivided share of the Partnership
interest of all Partners issued at any time and from time to time by the
Partnership, which has the rights, preferences and other privileges designated
in the Certificate of Designation related to a particular class of Preferred
Partnership Units. With respect to any class of Preferred Partnership Units, the
allocation of Preferred Partnership Units among the Partners holding units of
such class shall be as set forth on the Unitholder Ledger.
8
39
"PREFERRED UNITHOLDER" means a Partner holding one or more Preferred
Partnership Units.
"PROFIT" has the meaning provided in Section 5.1(f) hereof.
"PROPERTIES" means the Initial Hotels together with any other hotel
property or other investment in which the Partnership holds an ownership or
ground lessee interest, including collectively real and personal property.
"PROSPECTUS" means the final prospectus delivered to purchasers of
shares of the General Partner's common stock in the most recent public offering
of securities of the Company.
"PUBLIC OFFERING PRICE" shall mean the initial public offering price set
forth in the Prospectus for the Initial Offering.
"REDEEMING PARTNER" has the meaning provided in Section 8.5(a) hereof.
"REDEMPTION AMOUNT" means the Cash Amount, or the REIT Shares Amount, as
selected by the General Partner in its sole discretion pursuant to Section 8.5
hereof, subject to the obligation under Section 8.5(c) hereof in certain cases
to pay the Cash Amount.
"REDEMPTION RIGHT" has the meaning provided in Section 8.5(a) hereof.
"REDEMPTION SHARES" means all of the REIT Shares issued or to be issued
upon the redemption of Partnership Units under Section 8.5 hereof.
"REGISTERED REDEMPTION SHARES" means any Redemption Shares covered by a
Shelf Registration.
"REGULATIONS" means the Federal Income Tax Regulations promulgated under
the Code, as amended and as hereafter amended from time to time. Reference to
any particular provision of the Regulations shall mean that provision of the
Regulations on the date hereof and any succeeding provision of the Regulations.
"REIT" means a real estate investment trust under Sections 856 through
860 of the Code.
"REIT EXPENSES" means (i) all of the costs and expenses relating to the
formation and continuity of existence of the Company (as a General Partner and
Limited Partner) and any Subsidiaries thereof (which Subsidiaries shall, for
purposes of this definition, be included within the definition of Company),
including taxes, fees and assessments associated therewith, any and all costs,
expenses or fees payable to any director, officer, or employee of the Company,
(ii) costs and expenses relating to the public offering and registration of
securities from time to time by the Company and all statements, reports, fees
and expenses incidental thereto, including underwriting discounts and selling
commissions applicable to any such offering of securities by the Company, (iii)
costs and expenses associated with the preparation and filing of any periodic
reports by the Company under federal, state or local laws or regulations,
including filings with the Commission, (iv) costs
9
40
and expenses associated with compliance by the Company with laws, rules and
regulations promulgated by any regulatory body, including the Commission, and
(v) all other operating or administrative costs of the Company incurred in the
ordinary course of its business on behalf of the Partnership.
"REIT PREFERRED SHARE" means a share of preferred stock of the Company.
"REIT SHARE" means a share of common stock of the Company.
"REIT SHARES AMOUNT" shall mean a whole number of REIT Shares equal to
the product of the number of Partnership Units offered for redemption by a
Redeeming Partner, multiplied by the Conversion Factor (rounded down to the
nearest whole number in the event such product is not a whole number); provided
that in the event the Company issues to all holders of REIT Shares rights,
options, warrants or convertible or exchangeable securities entitling the
shareholders to subscribe for or purchase REIT Shares, or any other securities
or property (collectively, the "Rights"), then the REIT Shares Amount for such
Redeeming Parties shall also include the Rights that a holder of that number of
REIT Shares would be entitled to receive at the time of such redemption.
"SECURITIES ACT" shall have the meaning provided in Section 8.6(a)
hereof.
"SERVICE" means the Internal Revenue Service.
"SHELF REGISTRATION" has the meaning provided in Section 8.6(a) hereof.
"SHELF REGISTRATION PERIOD" has the meaning provided in Section 8.6(a)
hereof.
"SPECIFIED REDEMPTION DATE" means the first business day of the month
that is at least ten (10) Business Days after the receipt by the General Partner
of the Notice of Redemption; provided that if the General Partner enters into a
merger, combination or other transaction with another Person to combine its
outstanding REIT Shares, then no Specified Redemption Date shall occur after the
record date and prior to the effective date of such combination.
"STOCK INCENTIVE PLAN" means the 1994 Stock Incentive Plan of the
Company relating to the issuance of REIT Shares and grant of options to acquire
REIT Shares and similar rights to employees of the Company and other eligible
persons.
"SUBSIDIARY" means, with respect to any Person, any corporation 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.
"SUBSTITUTE LIMITED PARTNER" means any Person admitted to the
Partnership as a Limited Partner pursuant to Section 9.3 hereof.
"SURVIVING GENERAL PARTNER" has the meaning provided in Section 7.1(d)
hereof.
10
41
"TARGET CAPITAL ACCOUNT" means, with respect to any Partner, the amount
which such Partner would be entitled to receive if all of the assets of the
Partnership were sold at their Book Value and the proceeds distributed in
accordance with Section 5.6 hereof.
"THRESHOLD CASH AMOUNT" has the meaning provided in Section 8.5(a)
hereof.
"TRANSACTION" has the meaning provided in Section 7.1(c) hereof.
"TRANSFER" has the meaning provided in Section 9.2(a) hereof.
"TRANSFER AGENT" shall mean the transfer agent or agents engaged by the
General Partner in its sole discretion with respect to the common or preferred
stock of the General Partner or Partnership Units.
"UNITHOLDER LEDGER" shall mean the ledger maintained by the Transfer
Agent which reflects the ownership of the Partnership Units and shall be revised
from time to time pursuant to the instructions by the General Partner to the
Transfer Agent to reflect the issuance, redemption, exchange, or conversion of
Partnership Units.
"WARRANTS" means in the aggregate (i) the Warrants to Purchase
Partnership Units dated as of August 16, 1995, to be issued by the Partnership
to Xxxxxx X. Alter covering Partnership Units; (ii) the Warrants to Purchase
Partnership Units dated as of August 16, 1995, to be issued by the Partnership
to Xxxxxxx X. Xxxxxxxxx covering Partnership Units; (iii) the Warrants to
Purchase Partnership Units dated as of August 16, 1995, to be issued by the
Partnership to C. Xxxxxx Xxxxxx covering Partnership Units; and (iv) the
Warrants to Purchase Partnership Units dated as of August 16, 1995, to be issued
by the Partnership to MYPC covering Partnership Units.
ARTICLE II
PARTNERSHIP CONTINUATION AND IDENTIFICATION
2.1 ORGANIZATION. The Partnership is a limited partnership organized
pursuant to the provisions of the Act and upon the terms and conditions set
forth in the First Restated Agreement. The Partners hereby amend and restate the
First Restated Agreement in its entirety as of the date first hereinabove
written. Except as expressly provided herein to the contrary, the rights and
obligations of the Partners and the administration and termination of the
Partnership shall be governed by the Act. The Partnership Interest of each
Partner shall be personal property for all purposes. The Partners hereby agree
to continue the Partnership pursuant to the Act and upon the terms and
conditions set forth in this Agreement.
2.2 NAME. The name of the Partnership shall be Sunstone Hotel Investors,
L.P. The Partnership's business may be conducted under any other name or names
deemed advisable by the General Partner, including the name of the General
Partner or any Affiliate thereof. The words "Limited Partnership," "L.P.,"
"Ltd." or similar words or letters shall be included in the Partnership's
11
42
name where necessary for the purposes of complying with the laws of any
jurisdiction that so requires. The General Partner in its sole and absolute
discretion may change the name of the Partnership at any time and from time to
time and shall notify the Limited Partners of such change in the next regular
communication to the Limited Partners.
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 00 Xxxxxxxxxx Xxxxxx, Xxxxx X-000, Xxxxx, Xxxxxxxx 00000, and the registered
agent for service of process on the Partnership in the State of Delaware at such
registered office shall be The Xxxxxxxx-Xxxx Corporation System, Inc. The
principal office of the Partnership shall be 000 Xxxxx xx Xxxxxxxxxx, Xxxxx 000,
Xxx Xxxxxxxx, Xxxxxxxxxx 00000 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.
2.4 PARTNERS.
(a) The General Partner of the Partnership is Sunstone Hotel
Investors, Inc., a Maryland corporation. Its principal place of business shall
be the same as that of the Partnership. The Partnership Units that are owned by
the Company from time to time shall be deemed held by it in its capacity as the
General Partner, up to the number of Partnership Units required to give it a one
percent (1%) Percentage Interest, and the balance of such Partnership Units
shall be deemed Partnership Units held by the Company in its capacity as a
Limited Partner.
(b) The Limited Partners shall be those Persons identified as
Limited Partners on the Unitholder Ledger, as modified from time to time.
Additional Limited Partners may be admitted to the Partnership through the
issuance of Partnership Units as provided in Section 4.2, and Substitute Limited
Partners may be admitted to the Partnership through the assignment or other
disposition of Partnership Units as provided in Section 9.3. Limited Partners
may withdraw from the Partnership upon the redemption or transfer of all of
their Limited Partnership interests as provided in Section 9.7.
2.5 TERM AND DISSOLUTION.
(a) The term of the Partnership shall continue in full force and
effect until December 31, 2050, except that the Partnership shall be dissolved
upon the happening of any of the following events:
(i) The occurrence of an Event of Bankruptcy as to a
General Partner or the dissolution, death or withdrawal of a General
Partner unless the business of the Partnership is continued pursuant to
Section 7.3(b) hereof; provided if a General Partner is on the date of
such occurrence a partnership, the dissolution of such General Partner
as a result of the dissolution, death, withdrawal, removal or Event of
Bankruptcy of a partner in such partnership shall not be an event of
dissolution of the Partnership if the business of such General Partner
is continued by the remaining partner or partners, either alone or with
12
43
additional partners, and such General Partner and such partners comply
with any other applicable requirements of this Agreement;
(ii) The passage of ninety (90) days after the sale or
other disposition of all or substantially all the assets of the
Partnership (provided that if the Partnership receives an installment
obligation as consideration for such sale or other disposition, the
Partnership shall continue, unless sooner dissolved under the provisions
of this Agreement, until such time as such installment obligation or
obligations are paid in full);
(iii) The redemption of all Limited Partnership Interests
(other than any of such interests held by the General Partner); or
(iv) The election by the General Partner that the
Partnership should be dissolved.
(b) Upon dissolution of the Partnership (unless the business of
the Partnership is continued pursuant to Section 7.3(b) hereof), the General
Partner (or its trustee, receiver, successor or legal representative, including
the Liquidator) shall amend or cancel the Certificate and liquidate the
Partnership's assets and apply and distribute the proceeds thereof in accordance
with Section 5.6 hereof. Notwithstanding the foregoing, the liquidating General
Partner may either (i) defer liquidation of, or withhold from distribution for a
reasonable time, any assets of the Partnership (including those necessary to
satisfy the Partnership's debts and obligations), or (ii) distribute the assets
to the Partners in kind.
2.6 FILING OF CERTIFICATE AND PERFECTION OF LIMITED PARTNERSHIP. The
General Partner shall execute, acknowledge, record and file at the expense of
the Partnership, the Certificate and any and all amendments thereto and all
requisite fictitious name statements and notices in such places and
jurisdictions as may be necessary to cause the Partnership to be treated as a
limited partnership under, and otherwise to comply with, the laws of each state
or other jurisdiction in which the Partnership conducts business.
ARTICLE III
PURPOSE OF THE PARTNERSHIP
3.1 BUSINESS. The purpose and nature of the business to be conducted by
the Partnership is (i) to conduct any business that may be lawfully conducted by
a limited partnership organized pursuant to the Act, provided, however, that
such business shall be limited to and conducted in such a manner as to permit
the Company at all times to qualify as a REIT, unless the Company otherwise
ceases to qualify as a REIT, (ii) to enter into any partnership, joint venture
or other similar arrangement to engage in any of the foregoing or the ownership
of interests in any entity engaged in any of the foregoing and (iii) to do
anything necessary or incidental to the foregoing. The General Partner shall
also be empowered to do any and all acts and things necessary or prudent to
ensure that the Partnership will not be classified as a "publicly traded
partnership" for the purposes of Section
13
44
7704(a) of the Code. In connection with the foregoing, and without limiting the
General Partner's right in its sole discretion to cease qualifying as a REIT,
the Partners acknowledge that the General Partner's current status as a REIT
inures to the benefit of all the Partners and not solely to the General Partner.
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, provided that the
Partnership shall not take, or refrain from taking, any action which, in the
judg ment of the General Partner, in its sole and absolute discretion, (i) could
adversely affect the ability of the Company 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 Company or its
securities, unless such action (or inaction) shall have been specifically
consented to by the General Partner in writing.
3.3 PARTNERSHIP ONLY FOR PURPOSES SPECIFIED. The Partnership shall be a
partnership only for the purposes specified in Section 3.1 hereof, and this
Agreement shall not be deemed to create a partnership among the Partners with
respect to any activities whatsoever other than the activities within the
purposes of the Partnership as specified in Section 3.1 hereof. Except as
otherwise provided in this Agreement, no Partner shall have any authority to act
for, bind, commit or assume any obligation or responsibility on behalf of the
Partnership, its properties or any other Partner. No Partner, in its capacity as
a Partner under this Agreement, shall be responsible or liable for any
indebtedness or obligation of another Partner, nor shall the Partnership be
responsible or liable for any indebtedness or obligation of any Partner,
incurred either before or after the execution and delivery of this Agreement by
such Partner, except as to those responsibilities, liabilities, indebtedness or
obligations incurred pursuant to and as limited by the terms of this Agreement
and the Act.
ARTICLE IV
CAPITAL CONTRIBUTIONS AND ACCOUNTS
4.1 CAPITAL CONTRIBUTIONS. The Company, as a General Partner and Limited
Partner, initially contributed to the capital of the Partnership cash in an
amount set forth opposite its name on Exhibit "A" to the First Restated
Agreement. The Limited Partners (or their predecessors-in-interest) contributed
prior to the date of this Agreement to the Capital of the Partnership interests
in one or more of the Initial Hotels pursuant to the Purchase Agreements or
Contribution Agreements. The Agreed Value of each Limited Partner's ownership
interest in the Initial Hotels (other than the Company) that were contributed to
the Partnership were set forth opposite such Limited Partner's names on Exhibit
"A" to the First Restated Agreement for contributions made prior to the
introduction of the Unitholder Ledger; or, for contributions made after the
introduction of the Unitholder Ledger, such Agreed Value is established by
reference to the number of Partnership Units issued in exchange for such
contribution as evidenced on the Unitholder Ledger and calculating the value of
such units in accordance with the definition of "Agreed Value."
14
45
4.2 ADDITIONAL CAPITAL CONTRIBUTIONS AND ISSUANCES OF ADDITIONAL
PARTNERSHIP INTERESTS. Except as provided in this Section 4.2 or in Section 4.3,
the Partners shall have no right or obligation to make any additional Capital
Contributions or loans to the Partnership. The General Partner may contribute
additional capital to the Partnership, from time to time, and receive additional
Partnership Interests in respect thereof, in the manner contemplated in this
Section 4.2.
(a) Issuances of Additional Partnership Interests.
(i) General. The General Partner is hereby authorized to
cause the Partnership to issue such additional Partnership Interests in
the form of Partnership Units for any Partnership purpose at any time or
from time to time, to the Partners (including the General Partner) or to
other Persons for such consideration and on such terms and conditions as
shall be established by the General Partner in its sole and absolute
discretion, all without the approval of any Limited Partners. The
Partnership issued Partnership Units in the number set forth on Exhibit
"A" to the First Restated Agreement or on the Unitholder Ledger to each
of the Limited Partners who contributed an Initial Hotel to the
Partnership. Any additional Partnership Interests issued by the General
Partner have been and may be issued in one or more classes, or 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, equal or
subordinate to Limited Partnership Interests, all as shall be determined
by the General Partner in its sole and absolute discretion and without
the approval of any Limited Partner, subject to only to mandatory
provisions of applicable Delaware law, including, without limitation,
(i) the allocations of items of Partnership income, gain, loss,
deduction and credit to each such class or series of Partnership
Interests; (ii) the rights of each such class or series of Partnership
Interests to share in Partnership allocations and distributions; and
(iii) the rights of each such class or series of Partnership Interests
upon dissolution and liquidation of the Partnership. The General Partner
may issue additional Partnership Interests to any Person (including the
General Partner) as full or partial consideration for the contribution
of a hotel or other asset from such Person to the Partnership in which
case such Person's resultant Capital Contribution to the Partnership
shall equal the Agreed Value of the hotel or other asset contributed. In
addition to the foregoing, no additional Partnership Interests shall be
issued to the Company (as a General and Limited Partner) unless either:
(1)(A) the additional Partnership Interests are issued in
connection with an issuance of shares of or other debt or equity
interests in the Company, which shares or interests have
designations, preferences and other rights, all such that the
economic interests are substantially similar to the designations,
preferences and other rights of the additional Partnership
Interests issued to the Company by the Partnership in accordance
with this Section 4.2 and (B) the Company shall make a Capital
Contribution to the Partnership in cash in an amount equal to the
net proceeds raised in connection with the issuance of such
shares of or other interests in the Company or of assets acquired
by the Company with such net proceeds or a combination of such
cash and assets, or
15
46
(2) the additional Partnership Interests are issued to all
Partners in proportion to their respective Percentage Interests.
Without limiting the foregoing, the General Partner is expressly
authorized to cause the Partnership to issue Partnership Units (i) for
less than fair market value, so long as the General Partner concludes in
good faith that such issuance is in the best interests of the General
Partner and the Partnership, (ii) upon the exercise of any of the
Warrants from time to time, and (iii) upon the exercise of any rights,
options, warrants or convertible or exchangeable securities containing
the right to subscribe for, purchase or receive in an exchange
Partnership Units.
(ii) Upon Issuance of New Securities. After the Initial
Offering, the Company shall not grant, award or issue any (i) REIT
Shares (other than REIT Shares issued in connection with a redemption
pursuant to Section 8.5 hereof), (ii) REIT Preferred Shares, (iii)
rights, options, warrants or convertible or exchangeable securities
containing the right to subscribe for or purchase REIT Shares or REIT
Preferred Shares, or (iv) debt securities (the securities described in
(i), (ii), (iii) and (iv), collectively, "New Securities") unless:
(1) the General Partner shall cause the Partnership to
issue to the Company, 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 of such Partnership
Interests or securities are substantially similar to those of the
New Securities, and
(2) the Company contributes to the Partnership (A) the
cash proceeds from the issuance of such New Securities and from
the exercise of rights contained in such New Securities, (B) the
assets acquired by the Company from a third party with the cash
proceeds from the issuance of New Securities or in exchange for
the New Securities issued to such third party (which includes
assets of businesses whose equity interests are acquired by the
Company where the business is then dissolved by or merged into
the Company), or (C) a combination of (A) and (B) as determined
in the sole discretion of the Company (the contributions referred
to in (A), (B) and (C) collectively, a "Company Contribution").
The assets referred to in (B), which must be contributed by the
Company to the Partnership, need not consist of the assets
directly acquired by the Company (or the assets of businesses
whose equity interests are acquired by the Company where the
business is then dissolved by or merged into the Company).
Rather, the Company may first acquire such assets and sell all or
any part thereof to a third party (which may include Sunstone
Hotel Properties, Inc. or any successor thereto) in exchange for
any type and amount of consideration agreed upon by the Company
in its sole discretion and the third party, and the Company may
then contribute to the Partnership the consideration the Company
received in such sale. Notwithstanding the foregoing, the
Partnership shall (i) have no legal, equitable or beneficial
ownership of any cash or other assets of the Company unless and
until the Company contributes such cash or other assets to the
Partnership; (ii) shall have no obligation to the transferor of
assets to the Company; and (iii) shall not be
16
47
obligated to accept any stock of a corporation as a contribution
if the Partnership would have to liquidate or recapitalize such
corporation in order for the Company to maintain its REIT
status.
Notwithstanding anything in this Section 4.2(a) to the
contrary, the Company is allowed to issue New Securities in connection with an
acquisition of assets to be held directly by the Company if such direct
acquisition and issuance of New Securities has been approved and determined to
be in the best interests of the Company and the Partnership by a majority of the
Independent Directors. Without limiting the foregoing, the Company is expressly
authorized to issue New Securities for less than fair market value, and to cause
the Partnership to issue to the Company corresponding Partnership Interests, so
long as (x) the Company concludes in good faith that such issuance is in the
best interests of the Company and the Partnership (for example, and not by way
of limitation, the issuance of REIT Shares and corresponding Partnership Units
pursuant to an employee stock purchase plan providing for employee purchases of
REIT Shares at a discount from fair market value or employee stock options that
have an exercise price that is less than the fair market value of the REIT
Shares, either at the time of issuance or at the time of exercise), and (y) the
Company contributes the Company Contribution to the Partnership. By way of
example, in the event the Company issues REIT Shares for a cash purchase price
and contributes all of the proceeds of such issuance to the Partnership as
required hereunder, the Company shall be issued a number of additional
Partnership Units equal to the product of (A) the number of such REIT Shares
issued by the Company the proceeds of which were so contributed, multiplied by
(B) a fraction, the numerator of which is one hundred percent (100%), and the
denominator of which is the Conversion Factor in effect on the date of such
contribution.
(b) Value of Company Contribution; Certain Deemed Contributions.
In connection with any and all issuances of New Securities the Company shall
contribute the resultant Company Contribution to the Partnership as a Capital
Contribution. For purposes of determining the number of Partnership Units to be
issued to the Company in exchange for such Capital Contribution, the value of
the Capital Contribution shall be deemed to equal the gross proceeds of all New
Securities issued in connection with such contribution. The value of the gross
proceeds shall be deemed to equal the sum of (i) the gross cash proceeds of any
issuance of New Securities for cash (even though the proceeds actually received
by the Company are less than the gross proceeds of such issuance as a result of
any underwriter's commission or discount or other expenses paid or incurred in
connection with such issuance), and (ii) the aggregate value, as agreed upon by
the Company and the party or parties selling assets to the Company which are
included in a Company Contribution, of all REIT Shares, REIT Preferred Shares
and debt securities of the Company issued to such party or parties in exchange
for such assets. If, pursuant to clause (i) in the preceding sentence, the
Company is deemed to have contributed gross cash proceeds from the issuance of
New Securities for cash when the actual contribution of cash is less than the
gross proceeds as a result of an underwriter's commission or discount or other
expenses paid or incurred in connection with such issuance, then the Partnership
shall be deemed simultaneously to have incurred such offering expenses in
connection with the issuance of additional Partnership Units to the Company for
its required Company Contribution pursuant to Section 4.2(a).
17
48
(c) Adjustment of Value of Company Contribution for Contingent
Payment. In the event all or a portion of a particular Company Contribution to
the Partnership includes assets acquired from a third party and the Company's
agreement with such third party requires that the Company make a contingent
payment to such third party for such assets on a date subsequent to the date on
which the Company purchased the assets from the third party and contributed the
assets to the Partnership (e.g., an earn-out payment to be made on a future date
based on the performance of assets acquired from the third party), then
immediately following payment by the Company of such contingent purchase price
to the third party (whether in cash or New Securities, or a combination of cash
and New Securities), the value of the assets acquired from the third party and
previously contributed by the Company to the Partnership shall be deemed to be
increased by an amount equal to the contingent payment made by the Company to
such third party, and the Partnership shall make an equivalent cash payment or
corresponding issuance of Partnership Units to the Company, as follows:
(i) The Partnership shall pay to the Company cash in an
amount equal to the cash portion, if any, of the contingent payment;
(ii) The Partnership shall issue to the Company a number
of Common Partnership Units equal to the number of REIT Shares, if any,
included in the contingent payment; and
(iii) The Partnership shall issue to the Company a number
of Preferred Partnership Units equal to the number of REIT Preferred
Shares, if any, included in the contingent payment, which Preferred
Partnership Units shall have rights, preferences and privileges that
mirror the rights, preferences and privileges of such REIT Preferred
Shares and which Preferred Partnership Units shall be designated by
attaching as Exhibit "B" hereto an appropriate Certificate of
Designation at the time of issuance.
(d) Classes of Partnership Units to be Issued to the Company in
Exchange for Company Contribution. As provided in Section 4.2(a)(ii), in
exchange for a Company Contribution, the Partnership shall issue to the Company
Partnership Units having the rights, preferences and privileges equivalent to
the rights, preferences and privileges of the New Securities issued by the
Company to fund the Company Contribution. Specifically, the Partnership shall
issue to the Company (i) Common Partnership Units corresponding to REIT Shares
issued by the Company (whether such REIT Shares were issued for cash or in
exchange for assets), and (ii) Preferred Partnership Units corresponding to any
Preferred REIT Shares issued by the Company (whether such Preferred REIT Shares
were issued for cash or for assets). Whenever the Company issues a class of
Preferred REIT Shares not previously issued by the Company, the Partnership
shall attach as Exhibit "B" to this Agreement a Certificate of Designation for
the corresponding Preferred Partnership Units, setting forth rights, preferences
and privileges mirroring those of the corresponding REIT Preferred Shares.
(e) Minimum Limited Partnership Interest. In the event that
either a redemption pursuant to Section 8.5 hereof or an additional Capital
Contribution by the Company would result in the Limited Partners (other than the
General Partner), in the aggregate, owning less than the
18
49
Minimum Limited Partnership Interest, the General Partner and the Limited
Partners shall form another partnership and contribute sufficient Limited
Partnership Interests together with such other Limited Partners so that such
partnership owns at least the Minimum Limited Partnership Interest
(f) Stock Incentive Plan, Directors' Plan and Dividend
Reinvestment Plan. The General Partner has established the Stock Incentive Plan
and Directors' Plan and may from time to time establish other compensation or
other incentive plans to provide incentives to its Directors, executive officers
and certain key employees and consultants. The Company has also established the
Dividend Reinvestment Plan to permit certain persons to purchase REIT Shares
directly from the Company and to allow holders of REIT Shares to reinvest all or
a portion of their dividends on their REIT Shares in the purchase of additional
REIT Shares from the Company. The following examples are illustrative of the
operation of the provisions of Section 4.2(a)(ii) with respect to issuances of
New Securities to such Directors, officers, employees and consultants under the
Stock Incentive Plan and Directors' Plan, and the other persons under the
Dividend Reinvestment Plan (each, an "Eligible Person"):
(i) If the Company awards REIT Shares to any such Eligible
Person (A) the Company shall, as soon as practicable, contribute to the
Partnership (to be thereafter taken into account for the purposes of
calculating any cash distributable to the Partners) an amount equal to
the price, if any, paid to the Company by such party for such REIT
Shares, and (B) the Company shall be issued by the Partnership a number
of additional Partnership Units equal to the product of (1) the number
of such REIT Shares issued by the Company to such Eligible Person,
multiplied by (2) a fraction, the numerator of which is one hundred
percent (100%), and the denominator of which is the Conversion Factor in
effect on the date of such contribution;
(ii) If the Company awards an option or warrant relating
to REIT Shares pursuant to the Stock Incentive Plan, the Director's Plan
or otherwise to any Eligible Person, then the Partnership shall grant to
the Company a corresponding option or warrant to acquire Partnership
Units. Upon the exercise of such option or warrant to purchase REIT
Shares, (A) the Company shall, as soon as practicable after such
exercise, contribute to the capital of the Partnership (to be thereafter
taken into account for the purposes of calculating distributable cash)
an amount equal to the exercise price, if any, paid to the General
Partner by such exercising party in connection with the exercise of the
option or warrant, and (B) the Company shall be issued by the
Partnership a number of additional Partnership Units equal to the
product of (1) the number of REIT Shares issued by the Company in
satisfaction of such exercised option or warrant, multiplied by (2) a
fraction, the numerator of which is one hundred percent (100%), and the
denominator of which is the Conversion Factor in effect on the date of
such contribution; and
(iii) If the Company grants any director, officer or
employee share appreciation rights, performance share awards or other
similar rights ("Incentive Rights"), then simultaneously, the
Partnership shall grant the Company corresponding and economically
equivalent rights. Consequently, upon the cash payment by the Company to
19
50
its directors, officers or employees pursuant to such Incentive Rights,
the Partnership shall make an equal cash payment to the Company.
(g) Automatic Adjustments in Percentage Interests. In lieu of
issuing any rights, options, warrants, convertible or exchangeable securities to
purchase Partnership Units as contemplated by Sections 4.2(a)(ii), 4.2(f)(ii) or
4.2(f)(iii), the Partnership may at its election cause the Company's Partnership
Interests set forth on the Unitholder Ledger to be revised to reflect the
exercise of any such rights, options, warrants or convertible or exchangeable
securities.
(h) Admission of Additional Limited Partners; Pro Rata First
Quarter Distributions; Lock-Up. Any Person who receives Partnership Units
pursuant to this Section 4.2 who does not already hold Partnership Units shall
upon execution of a counterpart to this Agreement, by which such Person agrees
to be bound by all of the provisions hereof, become a Limited Partner of the
Partnership; provided that the General Partner may in its sole discretion
require that an amendment to this Agreement be effected in order to add a Person
as a new Limited Partner in order to address the specific terms of such
admission. Notwithstanding any provision in this Agreement to the contrary, any
Person who becomes a Limited Partner pursuant to this Section 4.2 shall not be
entitled to a full quarter's distributions on such Partnership Units for the
quarter in which such Partnership Units were issued to such Partner, but shall
only be entitled to a pro rata distribution on such Partnership Units for such
quarter based upon the number of days in such quarter such Partner held such
Partnership Units, unless the General Partner has waived this restriction in
writing for a particular Partner for a particular quarter. In addition, the
Limited Partners listed below and any person who becomes a Limited Partner after
the date of this Agreement shall execute a lock-up agreement at the request of
the managing underwriter in connection with any public underwritten securities
offering by the General Partner on the same terms and conditions as any such
agreement executed by Xx. Xxxxxx X. Alter, but in no event shall such lock-up
exceed 120 days after the first date that any shares are released for sale to
the public from such offering, and as a condition to any transfer of any
Partnership Units or Redemption Shares otherwise permitted under this Agreement
such Limited Partners shall cause any shareholder or other affiliate who
receives any Partnership Units from such Limited Partners to agree to be subject
to the obligation to execute such a lock-up agreement. The enumerated Limited
Partners referenced in the preceding sentence are: (i) Flagstaff Hotel Assets,
Inc.; (ii) Tucson Desert Assets, Inc.; (iii) Xxxxxxx, LLC; (iv) O.T. Hill, LLC;
and (v) Peacock, LLC.
4.3 COMPANY LOANS. The Company may from time to time advance funds to
the Partnership for any proper Partnership purpose as a loan ("Funding Loan"),
provided that the funds for any such Funding Loans must first be obtained by the
Company from a third party lender, and then all of such funds must be loaned by
the Company to the Partnership on the same terms and conditions, including
principal amount, interest rate, repayment schedule and costs and expenses, as
shall be applicable with respect to or incurred in connection with such loan
with such third party lender. Except for Funding Loans, the Company shall not
incur any indebtedness for borrowed funds; provided, however, that upon a
majority vote of the Independent Directors, any loan proceeds received by the
Company may be distributed to its shareholders or other equity holders if such
loan and distribution have been approved and determined by a majority of the
Independent Directors to be necessary to enable the Company to maintain its
status as a REIT under Sections 856-860 of the
20
51
Code. The Company may agree in its sole discretion to subordinate the repayment
of the Funding Loan to any other loan by an institutional lender to the
Partnership.
4.4 CAPITAL ACCOUNTS. A separate capital account (a "Capital Account")
shall be established and maintained for each Partner in accordance with
Regulations Section 1.704- 1(b)(2)(iv). If (i) a new or existing Partner
acquires an additional Partnership Interest in exchange for more than a de
minimis Capital Contribution, (ii) the Partnership distributes to a Partner more
than a de minimis amount of Partnership property as consideration for a
Partnership Interest, or (iii) the Partnership is liquidated within the meaning
of Regulation Section 1.704-1(b)(2)(ii)(g), the General Partner shall revalue
the property of the Partnership to its fair market value (taking into account
Section 7701(g) of the Code) in accordance with Regulations Section
1.704-1(b)(2)(iv)(f). When the Partnership's property is revalued by the General
Partner, the Capital Accounts of the Partners shall be adjusted in accordance
with Regulations Sections 1.704-1(b)(2)(iv)(f) and (g), which generally require
such Capital Accounts to be adjusted to reflect the manner in which the
unrealized gain or loss inherent in such property (that has not been reflected
in the Capital Accounts previously) would be allocated among the Partners
pursuant to Section 5.1 if there were a taxable disposition of such property for
its fair market value (taking into account Section 7701(g) of the Code) on the
date of the revaluation.
4.5 PERCENTAGE INTERESTS. If the number of outstanding Partnership Units
increases or decreases during a taxable year, each Partner's Percentage Interest
shall be adjusted to a percentage equal to the number of Partnership Units held
by such Partner divided by the aggregate number of outstanding Partnership
Units. If the Partners' Percentage Interests are adjusted pursuant to this
Section 4.5, the Profits and Losses for the taxable year in which the adjustment
occurs shall be allocated between the part of the year ending on the day when
the Partnership's property is revalued by the General Partner and the part of
the year beginning on the following day either (i) as if the taxable year had
ended on the date of the adjustment or (ii) based on the number of days in each
part. The General Partner, in its sole discretion, shall determine which method
shall be used to allocate Profits and Losses for the taxable year in which the
adjustment occurs. The allocation of Profits and Losses for the earlier part of
the year shall be based on the Percentage Interests before adjustment, and the
allocation of Profits and Losses for the later part shall be based on the
adjusted Percentage Interests.
4.6 NO INTEREST ON CONTRIBUTIONS. No Partner shall be entitled to
interest on its Capital Contribution.
4.7 RETURN OF CAPITAL CONTRIBUTIONS. No Partner shall be entitled to
withdraw any part of its Capital Contribution or its Capital Account or to
receive any distribution from the
Company, except as specifically provided in this Agreement. Except as otherwise
provided herein, there shall be no obligation to return to any Partner or
withdrawn Partner any part of such Partner's Capital Contribution for so long as
the Partnership continues in existence.
4.8 NO THIRD PARTY BENEFICIARY. No creditor or other third party having
dealings with the Partnership shall have the right to enforce the right or
obligation of any Partner to make Capital Contributions or loans or to pursue
any other right or remedy hereunder or at law or in equity, it
21
52
being understood and agreed that the provisions of this Agreement shall be
solely for the benefit of, and may be enforced solely by, the parties hereto and
their respective successors and assigns. None of the rights or obligations of
the Partners herein set forth to make Capital Contributions or loans to the
Partnership shall be deemed an asset of the Partnership for any purpose by any
creditor or other third party, nor may such rights or obligations be sold,
transferred or assigned by the Partnership or pledged or encumbered by the
Partnership to secure any debt or other obligation of the Partnership or of any
of the Partners. In addition, it is the intent of the parties hereto that no
distribution to any Limited Partner shall be deemed a return of money or other
property in violation of the Act. The payment of any such money or distribution
of any such property to a Limited Partner shall be deemed to be a compromise
within the meaning of Section 17-502(b) of the Act, and the Limited Partner
receiving any such money or property shall not be required to return any such
money or property to any Person, the Partnership or any creditor of the
Partnership. However, if any court of competent jurisdiction holds that,
notwithstanding the provisions of this Agreement, any Limited Partner is
obligated to return such money or property, such obligation shall be the
obligation of such Limited Partner and not of the General Partner. Without
limiting the generality of the foregoing, a deficit Capital Account of a Partner
shall not be deemed to be a liability of such Partner nor an asset or property
of the Partnership.
4.9 NO PREEMPTIVE RIGHTS. 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.
ARTICLE V
PROFITS AND LOSSES: DISTRIBUTIONS
5.1 ALLOCATION OF PROFIT AND LOSS.
(a) General. After giving effect to the special allocations set
forth in the other provisions of this Section 5.1, Profit or Loss, or items of
income, gain, loss or deduction included in the determination of Profit or Loss,
for each accounting period shall be allocated to the Partners as follows:
(i) Profit, or items of income or gain to the extent
necessary, shall be allocated to each Partner in an amount equal to the excess
of (i) the sum of (A) such Partner's Target Capital Account as of the last day
of the accounting period, and (B) any distributions made by the Partnership to
such Partner during the accounting period, over (ii) the sum of such Partner's
(X) Capital Account as of the beginning of the accounting period, (Y) any
Capital Contributions made by such Partner during the accounting period, and (Z)
any income or gain (or minus any deduction or loss) allocated to the Partner
under any other provision of this Section 5.1; and
(ii) Loss, or items of deduction or loss to the extent
necessary, shall be allocated to each Partner in an amount equal to the excess,
if any, of (i) the sum of (A) such Partner's Capital Account as of the beginning
of the accounting period, (B) any Capital Contributions made
22
53
by such Partner during the accounting period, and (C) any income or gain (or
minus any deduction or loss) allocated to the Partner under any other provisions
of this Section 5.1, over (ii) the sum of (X) such Partner's Target Capital
Account as of the last day of the accounting period, and (Y) any distributions
made by the Partnership to such Partner during the accounting period.
(b) Minimum Gain Chargeback. Notwithstanding any provision to the
contrary, (i) any expense of the Partnership that is a "nonrecourse deduction"
within the meaning of Regulations Section 1.704-2(b)(1) shall be allocated in
accordance with the Partners' respective Percentage Interests, (ii) any expense
of the Partnership that is a "partner nonrecourse deduction" within the meaning
of Regulations Section 1.704-2(i)(2) shall be allocated in accordance with
Regulations Section 1 .704-2(i)(1), (iii) if there is a net decrease in
Partnership Minimum Gain within the meaning of Regulations Section 1.704-2(f)(1)
for any Partnership taxable year, items of gain and income shall be allocated
among the Partners in accordance with Regulations Section 1.704-2(f) and the
ordering rules contained in Regulations Section 1.704-2(j), and (iv) if there is
a net decrease in Partner Nonrecourse Debt Minimum Gain within the meaning of
Regulations Section 1.704-2(i)(4) for any Partnership taxable year, items of
gain and income shall be allocated among the Partners in accordance with
Regulations Section 1.704-2(i)(4) and the ordering rules contained in
Regulations Section 1.704-2(j). A Partner's "interest in partnership profits"
for purposes of determining its share of the nonrecourse liabilities of the
Partnership within the meaning of Regulations Section 1.752-3(a)(3) shall be
such Partner's Percentage Interest.
(c) Qualified Income Offset. If a Limited Partner receives in any
taxable year an adjustment, allocation, or distribution described in
subparagraphs (4), (5), or (6) of Regulations Section 1.704-1(b)(2)(ii)(d) that
causes or increases a negative balance in such Partner's Capital Account that
exceeds the sum of such Partner's shares of Partnership Minimum Gain and Partner
Nonrecourse Debt Minimum Gain, as determined in accordance with Regulations
Sections 1.704- 2(g) and 1.704-2(i), such Partner shall be allocated specially
for such taxable year (and, if necessary, later taxable years) items of income
and gain in an amount and manner sufficient to eliminate such negative Capital
Account balance as quickly as possible as provided in Regulations Section
1.704-1(b)(2)(ii)(d). After the occurrence of an allocation of income or gain to
a Limited Partner in accordance with this Section 5.1(c), to the extent
permitted by Regulations Section 1.704-1(b), items of expense or loss shall be
allocated to such Partner in an amount necessary to offset the income or gain
previously allocated to such Partner under this Section 5.1(c).
(d) Capital Account Deficits. Loss shall not be allocated to a
Limited Partner to the extent that such allocation would cause a deficit in such
Partner's Capital Account (after reduction to reflect the items described in
Regulations Section 1.704-1(b)(2)(ii)(d)(4), (5) and (6)) to exceed the sum of
such Partner's shares of Partnership Minimum Gain and Partner Nonrecourse Debt
Minimum Gain. Any Loss in excess of that limitation shall be allocated to the
General Partner. After the occurrence of an allocation of Loss to the General
Partner in accordance with this Section 5.1(d), to the extent permitted by
Regulations Section 1.704-1(b), Profit shall be allocated to the General Partner
in an amount necessary to offset the Loss previously allocated to the General
Partner under this Section 5.1(d).
23
54
(e) Allocations Between Transferor and Transferee. If a Partner
transfers any part or all of its Partnership Interest, and the transferee is
admitted as a substitute Partner as provided herein, the distributive shares of
the various items of Profit and Loss allocable among the Partners during such
fiscal year of the Partnership shall be allocated between the transferor and the
substitute Partner either (i) as if the Partnership's fiscal year had ended on
the date of the transfer, or (ii) based on the number of days of such fiscal
year that each was a Partner without regard to the results of Partnership
activities in the respective portions of such fiscal year in which the
transferor and the transferee were Partners. The General Partner, in its sole
discretion, shall determine which method shall be used to allocate the
distributive shares of the various items of Profit and Loss between the
transferor and the substitute Partner.
(f) Definition of Profit and Loss. "Profit" or "Loss" means for
any accounting period, the amount, computed as of the last day thereof, of the
net income or loss of the Partnership determined in accordance with federal
income tax principles (but without requiring any items to be stated separately
pursuant to Code Section 703), but with the following adjustments:
(i) Any income of the Partnership that is exempt from
federal income tax shall be included in the computation of Profit or Loss;
(ii) Any expenditures of the Partnership described in Code
Section 705(a)(2)(B) or treated as Code Section 705(a)(2)(B) expenditures
pursuant to Regulations Section 1.704-1(b)(2)(iv)(1) shall be included in the
computation of Profit or Loss;
(iii) In any situation in which an item of income, gain,
loss or deduction is affected by the adjusted basis of property, the Book Value
of the Property shall be used in lieu of adjusted basis.
(g) Tax Allocations. Except as otherwise provided in this Section
5.1, items of income, gain, loss or deduction recognized for income tax purposes
shall be allocated in the same manner that the corresponding items entering into
the calculation of Profit or Loss are allocated pursuant to this Agreement.
(h) Section 704(c) Adjustments. In accordance with Code Section
704(c) and the Treasury Regulations thereunder and notwithstanding Section
5.1(g), items of income, gain, loss and deduction with respect to an asset, if
any, which has a Book Value different from its adjusted basis for federal income
tax purposes shall, solely for tax purposes, be allocated between the Partners
so as to take account of any such variation in the manner required by Code
Section 704(c) and Regulations Section 1.704-3(b). The allocation of such items
shall be made pursuant to the "Traditional Method" of Regulation Section
1.704-3(b). The assets of the Partnership (and the Limited Partners who
contributed such assets) that may be affected by this Section 5.1(h) include,
without limitation, (i) the Hampton Inn Hotel, Oakland, California (Inns
Properties and Westpac Shelter Corporation); and (ii) the Courtyard by Marriott
Hotel, Riverside, California (Riverside Hotel Partners, Inc.).
24
55
5.2 DISTRIBUTION OF CASH.
(a) Except as otherwise provided in Section 5.6, cash available
for distribution by the Partnership shall be distributed as follows:
(1) First, for any class of Preferred Partnership Units,
if there are any Preferred Partnership Units of such class outstanding on any
record date set forth in the applicable Certificate of Designation for payment
of a distribution to the holders thereof, the General Partner shall distribute
on the distribution date set forth in the Certificate of Designation to such
Preferred Unitholder(s) an amount per Preferred Partnership Unit required to be
paid pursuant to the Certificate of Designation. If there is more than one class
of Preferred Partnership Units, the priority of payment of distributions as
among the classes shall be governed by the Certificates of Designation for such
classes.
(2) Second, the General Partner shall distribute cash on a
quarterly (or, at the election of the General Partner, more frequent) basis, in
an amount determined by the General Partner in its sole discretion, to the
Partners who are Partners on the Partnership Record Date with respect to such
quarter (or other distribution period) in accordance with their respective
Percentage Interests on the Partnership Record Date.
(b) In no event may a Partner receive a distribution of cash with
respect to a Partnership Unit if such Partner is entitled to receive a dividend
with respect to a REIT Share for which all or part of such Partnership Unit has
been or will be exchanged.
5.3 REIT DISTRIBUTION REQUIREMENTS. The General Partner shall use its
reasonable efforts to cause the Partnership to distribute amounts sufficient to
enable the General Partner (i) to meet its distribution requirement for
qualification as a REIT as set forth in Section 857(a)(1) of the Code and (ii)
to avoid any federal income or excise tax liability imposed by the Code.
5.4 NO RIGHT TO DISTRIBUTIONS IN KIND. No Partner shall be entitled to
demand property other than cash in connection with any distributions by the
Partnership.
5.5 LIMITATIONS ON RETURN OF CAPITAL CONTRIBUTIONS. Notwithstanding any
of the provisions of this Article V, no Partner shall have the right to receive
and the General Partner shall not have the right to make, a distribution which
includes a return of all or part of a Partner's Capital Contributions, unless
after giving effect to the return of a Capital Contribution, the sum of all
Partnership liabilities, other than the liabilities to a Partner for the return
of his Capital Contribution, does not exceed the fair market value of the
Partnership's assets.
5.6 DISTRIBUTIONS UPON LIQUIDATION.
(a) Upon liquidation of the Partnership, after payment of, or
adequate provision for, debts and obligations of the Partnership, including any
Partner loans, any remaining assets of the Partnership shall be distributed in
the following order of priority:
25
56
(i) First, if there are any Preferred Partnership Units
outstanding, to the Preferred Unitholder(s) of each class of Preferred
Partnership Units, an amount per Preferred Partnership Unit of a particular
class of Preferred Partnership Units required to be paid upon liquidation as set
forth in the Certificate of Designation for such class. If there is more than
one class of Preferred Partnership Units, the priority of liquidation
distributions among the classes shall be governed by the Certificates of
Designation for such classes.
(ii) Thereafter, to the Common Unitholders with positive
Capital Accounts in accordance with their respective Percentage Interests.
For purposes of the preceding sentence, the Capital
Account of each Partner shall be determined after all adjustments made in
accordance with Sections 5.1 and 5.2 resulting from Partnership operations and
from all sales and dispositions of all or any part of the Partnership's assets.
Any distributions pursuant to this Section 5.6 should be made by the end of the
Partnership's taxable year in which the liquidation occurs (or, if later, within
ninety (90) days after the date of the liquidation). To the extent deemed
advisable by the General Partner, appropriate arrangements (including the use of
a liquidating trust) may be made to assure that adequate funds are available to
pay any contingent debts or obligations.
(b) If the General Partner has a negative balance in its Capital
Account following a liquidation of the Partnership, as determined after taking
into account all Capital Account adjustments in accordance with Sections 5.1 and
5.2 resulting from Partnership operations and from all sales and dispositions of
all or any part of the Partnership's assets, the General Partner shall
contribute to the Partnership an amount of cash equal to the negative balance in
its Capital Account and such cash shall be paid or distributed by the
Partnership to creditors, if any, and then to the Limited Partners in accordance
with Section 5.6(a). Such contribution by the General Partner shall be made by
the end of the Partnership's taxable year in which the liquidation occurs (or,
if later, within ninety (90) days after the date of the liquidation).
5.7 SUBSTANTIAL ECONOMIC EFFECT. It is the intent of the Partners that
the allocations of Profit and Loss under the Agreement have substantial economic
effect (or be consistent with the Partners' interests in the Partnership in the
case of the allocation of losses attributable to nonrecourse debt) within the
meaning of Section 704(b) of the Code as interpreted by the Regulations
promulgated pursuant thereto. Article V and other relevant provisions of this
Agreement shall be interpreted in a manner consistent with such intent.
5.8 AMOUNTS WITHHELD. All amounts withheld pursuant to the Code or any
provisions of any state or local tax law and Section 10.9 hereof with respect to
any allocation, payment or distribution to the General Partner, the Limited
Partners or Assignees shall be treated as amounts distributed to the General
Partner, Limited Partners, or Assignees pursuant to Section 5.1 for all purposes
under this Agreement.
26
57
ARTICLE VI
RIGHTS, OBLIGATIONS AND
POWERS OF THE GENERAL PARTNERSHIP
6.1 MANAGEMENT OF THE PARTNERSHIP.
(a) Except as otherwise expressly provided in this Agreement, the
General Partner shall have full, complete and exclusive discretion to manage and
control the business of the Partnership for the purposes herein stated, and
shall make all decisions affecting the business and assets 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 7.1 hereof, shall have full power and authority to do all
things deemed necessary or desirable by it to conduct the business of the
Partnership, to exercise all powers set forth in Section 3.2 hereof and to
effectuate the purposes set forth in Section 3.1 hereof, including, without
limitation:
(i) to acquire, purchase, own, lease and dispose of any
real property and any other property or assets that the General Partner
determines are necessary or appropriate or in the best interests of the
business of the Partnership;
(ii) to landscape, renovate, reconstruct, remodel or
construct buildings, including without limitation hotels, and make other
improvements on the properties now or hereafter owned or leased by the
Partnership or any Subsidiary of the Partnership;
(iii) to borrow money for the Partnership, issue evidences
of indebtedness in connection therewith, refinance, guarantee, increase
the amount of, modify, amend or change the terms of, or extend the time
for the payment of, any indebtedness or obligation to the Partnership,
and secure such indebtedness by mortgage, deed of trust, pledge or other
lien on the Partnership's assets;
(iv) to pay, either directly or by reimbursement, for all
operating costs and general administrative expenses of the General
Partner or the Partnership, to third parties or to the General Partner
as set forth in this Agreement;
(v) to lease all or any portion of any of the
Partnership's assets, whether or not the terms of such leases extend
beyond the termination date of the Partnership and whether or not any
portion of the Partnership's assets so leased are to be occupied by the
lessee, or, in turn, subleased in whole or in part to others, for such
consideration and on such terms as the General Partner may determine;
(vi) to prosecute, defend, arbitrate, or compromise any
and all claims or liabilities in favor of or against the Partnership, on
such terms and in such manner as the General Partner may reasonably
determine, and similarly to prosecute, settle or defend
27
58
litigation with respect to the Partners, the Partnership, or the
Partnership's assets; provided, however, that the General Partner may
not, without the consent of all of the Partners, confess a judgment
against the Partnership;
(vii) to file applications, communicate, and otherwise
deal with any and all governmental agencies having jurisdiction over, or
in any way affecting, the Partnership's assets or any other aspect of
the Partnership business;
(viii) to make or revoke any election permitted or
required of the Partnership by any taxing authority;
(ix) to maintain such insurance coverage for public
liability, fire and casualty, and any and all other insurance for the
protection of the Partnership, for the conservation of Partnership
assets, or for any other purpose convenient or beneficial to the
Partnership, in such amounts and such types, as it shall determine from
time to time;
(x) to determine whether or not to apply any insurance
proceeds for any property to the restoration of such property or to
distribute the same;
(xi) to retain legal counsel, accountants, consultants,
real estate brokers, and such other persons as the General Partner may
deem necessary or appropriate in connection with the Partnership
business and to pay therefor such reasonable remuneration as the General
Partner may deem reasonable and proper;
(xii) to retain other services of any kind or nature in
connection with the Partnership business, and to pay therefor such
remuneration as the General Partner may deem reasonable and proper;
(xiii) to negotiate and conclude agreements on behalf of
the Partnership with respect to any of the rights, powers and authority
conferred upon the General Partner;
(xiv) to maintain accurate accounting records and to file
promptly all federal, state and local income tax returns on behalf of
the Partnership;
(xv) to distribute Partnership cash or other partnership
assets in accordance with this Agreement;
(xvi) to form or acquire an interest in, and contribute
property to, any further limited or general partnerships, joint ventures
or other relationships that it deems desirable (including, without
limitation, the acquisition of interests in, and the contributions of
properly to, its Subsidiaries and any other Person in which it has an
equity interest from time to time);
(xvii) to establish Partnership reserves for working
capital, capital expenditures, contingent liabilities, or any other
valid Partnership purpose;
28
59
(xviii) to negotiate, execute, and perform 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;
(xix) to establish one or more divisions of the
Partnership, the selection and dismissal of employees of the
Partnership, any division of the Partnership, or the General Partner
(including, without limitation, employees having titles such as
"president," "vice president," "secretary" and "treasurer" of the
Partnership, any division of the Partnership or the General Partner),
and agents, outside attorneys, accountants, consultants and contractors
of the General Partner, the Partnership or any division of the
Partnership, and the determination of their compensation and other terms
of employment or hiring;
(xx) to issue REIT Shares to acquire Partnership Units
held by a Limited Partner in connection with such Limited Partner's
exercise of its Redemption Right under Section 8.5; and
(xxi) to take such other action, execute, acknowledge,
swear to or deliver such other documents and instruments, and perform
any and all other acts the General Partner deems necessary or
appropriate for the formation, continuation and conduct of the business
and affairs of the Partnership and to possess and enjoy all of the
rights and powers of a general partner as provided by the Act.
Except as otherwise provided herein, to the extent the duties of
the General Partner require expenditures of funds to be paid to third parties,
the General Partner shall not have any obligations hereunder except to the
extent that partnership funds are reasonably available to it for the performance
of such duties, and nothing herein contained shall be deemed to require the
General Partner, in its capacity as such, to expend its individual funds for
payment to third parties or to undertake any individual liability or obligation
on behalf of the Partnership.
(b) The Partnership shall not incur or allow to exist
Indebtedness (as defined in the Articles of Incorporation) in excess of the
limitations contained in the Articles of Incorporation.
(c) The General Partner is expressly authorized to enter into, in
the name and on behalf of the Partnership, a right of first opportunity
arrangement and other conflict avoidance agreements with various Affiliates of
the Partnership and the General Partner, on such terms as the General Partner,
in its sole and absolute discretion, believes are advisable.
6.2 DELEGATION OF AUTHORITY. The General Partner may delegate any or all
of its powers, rights and obligations hereunder, and may appoint, employ,
contract or otherwise deal with any Person for the transaction of the business
of the Partnership, which Person may, under supervision of the General Partner,
perform any acts or services for the Partnership as the General Partner may
approve.
29
60
6.3 INDEMNIFICATION AND EXCULPATION OF INDEMNITEES.
(a) The Partnership shall indemnify each Indemnitee from and
against any and all losses, claims, damages, (joint or several) liabilities,
expenses (including reasonable legal fees and expenses), judgments, fines,
settlements, and other amounts arising from any and all claims, demands,
actions, suits or proceedings, civil, criminal, administrative or investigative,
that relate to the operations of the Partnership as set forth in this Agreement
in which any Indemnitee may be involved, or is threatened to be involved, as a
party or otherwise, unless it is established that: (i) the act or omission of
the Indemnitee was material to the matter giving rise to the proceeding and
either was committed in bad faith or was the result of active and deliberate
dishonesty; (ii) the Indemnitee actually received an improper personal benefit
in money, property or services; or (iii) in the case of any criminal proceeding,
the Indemnitee had reasonable cause to believe that the act or omission was
unlawful. 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 6.3(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 6.3(a). Any indemnification pursuant to this Section 6.3 shall be
made only out of the assets of the Partnership.
(b) The Partnership may reimburse an Indemnitee for reasonable
expenses incurred by an Indemnitee who is a party to a proceeding in advance of
the final disposition of the proceeding upon receipt by the Partnership of (i) a
written affirmation by the Indemnitee of the Indemnitee's good faith belief that
the standard of conduct necessary for indemnification by the Partnership as
authorized in this Section 6.3 has been met, and (ii) a written undertaking by
or on behalf of the Indemnitee to repay the amount if it shall ultimately be
determined that the standard of conduct has not been met.
(c) The indemnification provided by this Section 6.3 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.
(d) The Partnership may purchase and maintain insurance, on
behalf of the Indemnitees and such other Persons as the General Partner shall
determine, against any liability that may be asserted against or expenses that
may be incurred by such Person in connection with the Partnership's activities,
regardless of whether the Partnership would have the power to indemnify such
Person against such liability under the provisions of this Agreement.
(e) For purposes of this Section 6.3, the Partnership shall be
deemed to have requested an Indemnitee to serve as fiduciary of an employee
benefit plan whenever the performance by it of its duties to the Partnership
also imposes duties on, or otherwise involves services by, it to the plan or
participants or beneficiaries of the plan; excise taxes assessed on an
Indemnitee with respect to an employee benefit plan pursuant to applicable law
shall constitute fines within the meaning of this Section 6.3; and actions taken
or omitted by the Indemnitee with respect to an
30
61
employee benefit plan in the performance of its duties for a purpose reasonably
believed by it to be in the interest of the participants and beneficiaries of
the plan shall be deemed to be for a purpose which is not opposed to the best
interests of the Partnership.
(f) In no event may an Indemnitee subject the Limited Partners to
personal liability by reason of the indemnification provisions set forth in this
Agreement.
(g) An Indemnitee shall not be denied indemnification in whole or
in part under this Section 6.3 because the Indemnitee had an interest in the
transaction with respect to which the indemnification applies if the transaction
was otherwise permitted by the terms of this Agreement.
(h) The provisions of this Section 6.3 are for the benefit of the
Indemnitees, their heirs, successors, assigns and administrators and shall not
be deemed to create any rights for the benefit of any other Persons.
6.4 LIABILITY OF THE GENERAL PARTNER.
(a) Notwithstanding anything to the contrary set forth in this
Agreement, the General Partner shall not be liable for monetary damages to the
Partnership or any Partners for losses sustained or liabilities incurred as a
result of errors in judgment or of any act or omission if the General Partner
acted in good faith.
(b) The Limited Partners expressly acknowledge that the General
Partner is acting on behalf of the Partnership and the General Partner's
shareholders collectively, that the General Partner is under no obligation to
consider the separate interests of the Limited Partners (including, without
limitation, the tax consequences to Limited Partners) in deciding whether to
cause the Partnership to take (or decline to take) any actions, and that the
General Partner shall not be liable for monetary damages for losses sustained,
liabilities incurred, or benefits not derived by Limited Partners in connection
with such decisions, provided that the General Partner has acted in good faith.
(c) Subject to its obligations and duties as General Partner set
forth in Section 6.1 hereof, the General Partner may exercise any of the powers
granted to it under this
Agreement and perform any of the duties imposed upon it hereunder either
directly or by or through its agents. The General Partner shall not be
responsible for any misconduct or negligence on the part of any such agent
appointed by it in good faith.
(d) 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 prevent the General Partner
from incurring any taxes under Section 857, Section 4981, or any other provision
of the Code, is expressly authorized under this Agreement and is deemed approved
by all of the Limited Partners.
31
62
(e) Any amendment, modification or repeal of this Section 6.4 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 6.4 as in effect immediately prior to such
amendment, modification or repeal with respect to matters occurring, in whole or
in part, prior to such amendment, modification or repeal, regardless of when
claims relating to such matters may arise or be asserted.
6.5 EXPENDITURES BY PARTNERSHIP. The General Partner is hereby
authorized to pay compensation for accounting, administrative, legal, technical,
management and other services rendered to the Partnership. All of the aforesaid
expenditures (including Administrative Expenses) shall be made on behalf of the
Partnership, and the General Partner shall be entitled to reimbursement by the
Partnership for any expenditure (including Administrative Expenses) incurred by
it on behalf of the Partnership which shall be made other than out of the funds
of the Partnership. The Partnership shall also assume, and pay when due, all
Administrative Expenses.
6.6 OUTSIDE ACTIVITIES; REDEMPTION TENDER OFFER OF REIT SHARES.
Subject to Section 6.8 hereof, the Articles of Incorporation and
any agreements entered into by the General Partner or its Affiliates with the
Partnership or a Subsidiary, any officer, director, employee, agent, trustee,
Affiliate or shareholder of the General 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
substantially similar or identical to those of the Partnership. Neither the
Partnership nor any of the Limited Partners shall have any rights by virtue of
this Agreement in any such business ventures, interest or activities. None of
the Limited Partners nor any other Person shall have any rights by virtue of
this Agreement or the partnership relationship established hereby in any such
business ventures, interests or activities, and the General Partner shall have
no obligation pursuant to this Agreement to offer any interest in any such
business ventures, interests and activities to the Partnership or any Limited
Partner, even if such opportunity is of a character which, if presented to the
Partnership or any Limited Partner, could be taken by such Person.
6.7 EMPLOYMENT OR RETENTION OF AFFILIATES.
(a) Any Affiliate of the General Partner may be employed or
retained by the Partnership and may otherwise deal with the Partnership (whether
as a buyer, lessor, lessee, manager, furnisher of goods or services, broker,
agent, lender or otherwise) and may receive from the Partnership any
compensation, price, or other payment therefor which the General Partner
determines to be fair and reasonable.
(b) The Partnership may lend or contribute to its Subsidiaries or
other Persons in which it has an equity investment, and such Persons may borrow
funds from the Partnership, on terms and conditions established in the sole and
absolute discretion of the General Partner. The foregoing authority shall not
create any right or benefit in favor of any Subsidiary or any other Person.
32
63
(c) The Partnership may transfer assets to joint ventures, other
partnerships, corporations or other business entities in which it is or thereby
becomes a participant upon such terms and subject to such conditions as the
General Partner deems are consistent with this Agreement and applicable law.
(d) Except as expressly permitted by this Agreement, neither the
General Partner nor any of its Affiliates shall sell, transfer or convey any
property to, or purchase any property from, the Partnership, directly or
indirectly, except pursuant to transactions that are on terms that are fair and
reasonable to the Partnership.
6.8 COMPANY PARTICIPATION. The General Partner agrees that all business
activities of the General Partner, including activities pertaining to the
acquisition, development and/or ownership of hotels or other property, shall be
conducted through the Partnership; provided, however, that the Company is
allowed to make a direct acquisition, but if and only if, such acquisition is
made in connection with the issuance of New Securities, which direct acquisition
and issuance have been approved and determined to be in the best interests of
the Company and the Partnership by a majority of the Independent Directors. The
Company also agrees that all borrowings of the Company shall constitute Funding
Loans, subject to the exception set forth in Section 4.3 hereof.
ARTICLE VII
CHANGES IN GENERAL PARTNER
7.1 TRANSFER OF THE GENERAL PARTNER'S PARTNERSHIP INTEREST.
(a) The General Partner may not transfer any of its General
Partnership Interest or Limited Partnership Interests or withdraw as General
Partner except as provided in Article 9, Section 7.1(c) or in connection with a
transaction described in Section 7.1(d).
(b) The General Partner agrees that it will at all times own (as
a general or limited partner) at least a 20% Percentage Interest.
(c) Except as otherwise provided in Section 6.8 or Section 7.1(d)
hereof, the General Partner shall not engage in any merger, consolidation or
other combination with or into another Person or sale of all or substantially
all of its assets, or any reclassification, or any recapitalization or change of
outstanding REIT 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 of REIT Shares)
(each a "Transaction"), unless (i) the Transaction also includes a merger of the
Partnership or sale of substantially all of the assets of the Partnership as a
result of which all Limited Partners will receive for each Partnership Unit an
amount of cash, securities, or other property equal to the product of the
Conversion Factor and the greatest amount of cash, securities or other property
paid in the Transaction to a holder of one REIT Share in consideration of one
REIT Share, provided that if, in connection with the Transaction, a purchase,
tender or exchange offer ("Offer") shall have been made to and accepted by the
holders of more than 50 percent of the outstanding REIT Shares, each holder
33
64
of Partnership Units shall be given the option to exchange its Partnership Units
for the greatest amount of cash, securities, or other property which a Limited
Partner would have received had it (A) exercised its Redemption Right and (B)
sold, tendered or exchanged pursuant to the Offer the REIT Shares received upon
exercise of the Redemption Right immediately prior to the expiration of the
Offer; and (ii) no more than 75 percent of the equity securities of the
acquiring Person in such Transaction shall be owned, after consummation of such
Transaction, by the General Partner or Persons who were Affiliates of the
Partnership or the General Partner immediately prior to the date on which the
Transaction is consummated.
(d) Notwithstanding Section 7.1(c), the General Partner may merge
into or consolidate with another entity if immediately after such merger or
consolidation (i) substantially all of the assets of the successor or surviving
entity (the "Surviving General Partner"), other than Partnership Units held by
the General Partner, are contributed to the Partnership as a Capital
Contribution in exchange for Partnership Units with a fair market value equal to
the value of the assets so contributed as determined by the Surviving General
Partner in good faith and (ii) the Surviving General Partner expressly agrees to
assume all obligations of the General Partner hereunder. Upon such contribution
and assumption, the Surviving General Partner shall have the right and duty to
amend this Agreement as set forth in this Section 7.1(d). The Surviving General
Partner shall in good faith arrive at a new method for the calculation of the
Cash Amount and Conversion Factor for a Partnership Unit after any such merger
or consolidation so as to approximate the existing method for such calculation
as closely as reasonably possible. Such calculation shall take into account,
among other things, the kind and amount of securities, cash and other property
that was receivable upon such merger or consolidation by a holder of REIT Shares
and/or options, warrants or other rights relating thereto, and which a holder of
Partnership Units could have acquired had such Partnership Units been redeemed
immediately prior to such merger or consolidation. Such amendment to this
Agreement shall provide for adjustment to such method of calculation which shall
be as nearly equivalent as may be practicable to the adjustments provided for
with respect to the Conversion Factor. The above provisions of this Section
7.1(d) shall similarly apply to successive mergers or consolidations permitted
hereunder.
7.2 ADMISSION OF A SUBSTITUTE OR SUCCESSOR GENERAL PARTNER. A Person
shall be admitted as a substitute or successor General Partner of the
Partnership only if the following terms and conditions are satisfied:
(a) a majority-in-interest of the Limited Partners (other than
the General Partner) shall have consented in writing to the admission of the
substitute or successor General Partner, which consent may be withheld in the
sole discretion of such Limited Partners;
(b) the Person to be admitted as a substitute or additional
General Partner shall have accepted and agreed to be bound by all the terms and
provisions of this Agreement by executing a counterpart thereof and such other
documents or instruments as may be required or appropriate in order to effect
the admission of such Person as a General Partner, and a certificate evidencing
the admission of such Person as a General Partner shall have been filed for
recordation and all other actions required by Section 2.6 hereof in connection
with such admission shall have been performed;
34
65
(c) if the Person to be admitted as a substitute or additional
General Partner is a corporation or a partnership it shall have provided the
Partnership with evidence satisfactory to counsel for the Partnership of such
Person's authority to become a General Partner and to be bound by the terms and
provisions of this Agreement; and
(d) counsel for the Partnership shall have rendered an opinion
(relying on such opinions from other counsel and the state or any other
jurisdiction as may be necessary) that the admission of the person to be
admitted as a substitute or additional General Partner is in conformity with the
Act, that none of the actions taken in connection with the admission of such
Person as a substitute or additional General Partner will cause (i) the
Partnership to be classified other than as a partnership for federal income tax
purposes, or (ii) the loss of any Limited Partner's limited liability.
7.3 EFFECT OF BANKRUPTCY, WITHDRAWAL, DEATH OR DISSOLUTION OF A GENERAL
PARTNER.
(a) Upon the occurrence of an Event of Bankruptcy as to a General
Partner or the withdrawal, removal or dissolution of a General Partner (except
that, if a General Partner is on the date of such occurrence a partnership, the
withdrawal, death, dissolution, Event of Bankruptcy as to, or removal of a
partner in, such partnership shall be deemed not to be a dissolution of such
General Partner if the business of such General Partner is continued by the
remaining partner or partners), the Partnership shall be dissolved and
terminated unless the Partnership is continued pursuant to Section 7.3(b)
hereof.
(b) Following the occurrence of an Event of Bankruptcy as to a
General Partner or the withdrawal, removal or dissolution of a General Partner
(except that, if a General Partner is on the date of such occurrence a
partnership, the withdrawal, death, dissolution, Event of Bankruptcy as to, or
removal of a partner in, such partnership shall be deemed not to be a
dissolution of such General Partner if the business of such General Partner is
continued by the remaining partner or partners), the Limited Partners, within
ninety (90) days after such occurrence, may elect to reconstitute the
Partnership and continue the business of the Partnership for the balance of the
term specified in Section 2.5 hereof by selecting, subject to Section 7.2 hereof
and any other provisions of this Agreement, a substitute General Partner by
unanimous consent of the Limited Partners. If the Limited Partners elect to
reconstitute the Partnership and admit a substitute General Partner, the
relationship with the Partners and of any Person who has acquired an interest of
a Partner in the Partnership shall be governed by this Agreement.
7.4 PURCHASE OF PARTNERSHIP UNITS. In the event the General Partner
exercises any right it has under the Articles of Incorporation or otherwise to
purchase REIT Shares, REIT Preferred Shares or debt securities of the Company,
or to otherwise redeem REIT Shares, REIT Preferred Shares or debt securities of
the Company (whether pursuant to a tender offer or otherwise), then the General
Partner shall cause the Partnership to purchase from it that number and type of
Partnership Units corresponding to the REIT Shares, REIT Preferred Shares or
debt securities of the Company, on the same terms and for the same aggregate
price that the General Partner purchased such REIT Shares, REIT Preferred Shares
or debt securities of the Company.
35
66
ARTICLE VIII
RIGHTS AND OBLIGATIONS
OF THE LIMITED PARTNERS
8.1 MANAGEMENT OF THE PARTNERSHIP. The Limited Partners shall not
participate in the management or control of Partnership business nor shall they
transact any business for the Partnership, nor shall they have the power to sign
for or bind the Partnership, such powers being vested solely and exclusively in
the General Partner.
8.2 POWER OF ATTORNEY.
(a) Each Limited Partner and each Assignee hereby irrevocably
constitutes and appoints the General Partner, any Liquidator (as defined below),
and authorized officers and attorneys-in-fact of each, and each of those acting
singly, in each case with full power of substi tution, as its true and lawful
agent and attorney-in-fact, with full power and authority in its name, place and
stead to:
(i) execute, swear to, acknowledge, deliver, file and
record in the appropriate public offices (a) all certificates, documents
and other instruments (including, without limitation, this Agreement and
the Certificate and all amendments or restatements thereof) that the
General Partner or any liquidator of the Partnership's assets (the
"Liquidator") deems appropriate or necessary to form, qualify or
continue the existence or qualification of the Partnership as a limited
partnership (or a partnership in which the Limited Partners have limited
liability) in the State of Delaware and in all other jurisdictions in
which the Partnership may or plans to conduct business or own property;
(b) all instruments that the General Partner or the Liquidator deems
appropriate or necessary to reflect any amendment, change, modification
or restatement of this Agreement in accordance with its terms; (c) all
conveyances and other instruments or documents that the General Partner
deems appropriate or necessary to reflect the dissolution and
liquidation of the Partnership pursuant to the terms of this Agreement,
including, without limitation, a certificate of cancellation; (d) all
instruments relating to the admission, withdrawal, removal or
substitution of any Partner pursuant to, or other events described
herein 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
(ii) execute, swear to, seal, acknowledge and file all
ballots, consents, approvals, waivers, certificates and other
instruments appropriate or necessary, in the sole and absolute
discretion of the General Partner or the 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.
36
67
Nothing contained herein shall be construed as authorizing the General Partner
or any Liquidator to amend this Agreement except as may be otherwise expressly
provided for in this Agreement.
(b) The foregoing power of attorney is hereby declared to be
irrevocable and a special power coupled with an interest, in recognition of the
fact that each of the Partners will be relying upon the power of the General
Partner and any Liquidator to act as contemplated by this Agreement in any
filing or other action by it on behalf of the Partnership, and it shall survive
and not be affected by the subsequent incapacity of any Limited Partner or
Assignee and the transfer of all or any portion of such Limited Partner's or
Assignee's Partnership Units and shall extend to such Limited Partner's or
Assignee's heirs, successors, assigns and personal representatives. Each such
Limited Partner or Assignee hereby agrees to be bound by any representation made
by the General Partner or any Liquidator, acting in good faith pursuant to such
power of attorney, and each such Limited Partner or Assignee hereby waives any
and all defenses which may be available to contest, negate or disaffirm the
action of the General Partner or any Liquidator, taken in good faith under such
power of attorney. Each Limited Partner or Assignee shall execute and deliver to
the General Partner or the Liquidator, within fifteen (15) days after receipt of
the General Partner's or Liquidator's request therefor, such further
designation, powers of attorney and other instruments as the General Partner or
the Liquidator, as the case may be, deems necessary to effectuate this Agreement
and the purposes of the Partnership.
8.3 LIMITATION ON LIABILITY OF LIMITED PARTNERS. No Limited Partner
shall be liable for any debts, liabilities, contracts or obligations of the
Partnership. A Limited Partner shall be liable to the Partnership only to make
payments of his Capital Contribution, if any, as and when due hereunder. After
his Capital Contribution is fully paid, no Limited Partner shall, except as
otherwise required by the Act, be required to make any further Capital
Contributions or other payments or lend any funds to the Partnership.
8.4 OWNERSHIP BY LIMITED PARTNER OF CORPORATE GENERAL PARTNER OR
AFFILIATE. No Limited Partner shall at any time, either directly or indirectly,
own any stock or other interest in the General Partner or in any Affiliate
thereof, if such ownership by itself or in conjunction with other stock or other
interests owned by other Limited Partners would, in the opinion of counsel for
the Partnership, jeopardize the classification of the Partnership as a
partnership for federal income tax purposes. The General Partner shall be
entitled to make such reasonable inquiry of the Limited Partners as is required
to establish compliance by the Limited Partners with the provisions of this
Section.
8.5 REDEMPTION RIGHT.
(a) Subject to Section 8.5(c) and Section 9.8, each Limited
Partner who holds Common Partnership Units (including Limited Partners who have
obtained Common Partnership Units through the exercise of conversion rights, if
any, applicable to their Preferred Partnership Units), other than the General
Partner, shall have the right (the "Redemption Right") to require the
Partnership on a Specified Redemption Date to either (i) redeem all or a portion
of the Common Partnership Units held by such Limited Partner at a redemption
price equal to Cash Amount or (ii) to exchange all or a portion of the Common
Partnership Units held by such Limited Partner for REIT
37
68
Shares at a ratio equal to the Conversion Factor. The Redemption Right shall be
exercised pursuant to a Notice of Redemption delivered to the General Partner by
the Limited Partner who is exercising the Redemption Right (the "Redeeming
Partner"), provided that no more than two (2) Notices of Redemption from any
single Limited Partner may be delivered to the General Partner during each
calendar year. No such Limited Partner may exercise the Redemption Right for
less than five hundred (500) Common Partnership Units or, if such Limited
Partner holds less than five hundred (500) Common Partnership Units, all of the
Common Partnership Units held by such Limited Partner. The Redeeming Partner
shall have no right, with respect to any Common Partnership Units so redeemed,
to receive any distribution paid with respect to Common Partnership Units if the
record date for such distribution is on or after the Specified Redemption Date.
Notwithstanding the preceding sentence to the contrary, if the Partnership or
the General Partner elects under Section 8.5(c) to extend the payment date for
the Cash Amount, then to the extent a Partnership Record Date occurs between the
Specified Redemption Date and the date such Cash Amount is paid, the Redeeming
Partner shall receive the distribution relating to such Partnership Record Date
with respect to such Common Partnership Units being redeemed.
(b) Notwithstanding the provisions of Section 8.5(a), the General
Partner may, in its sole and absolute discretion, assume directly and satisfy a
Redemption Right by paying to the Redeeming Partner the Redemption Amount on the
Specified Redemption Date, whereupon the General Partner shall acquire the
Common Partnership Units offered for redemption by the Redeeming Partner and
shall be treated for all purposes of this Agreement as the owner of such Common
Partnership Units. In the event the General Partner shall exercise its right to
satisfy the Redemption Right in the manner described in the preceding sentence,
the Partnership shall have no obligation to pay any amount to the Redeeming
Partner with respect to such Redeeming Partner's exercise of the Redemption
Right, and each of the Redeeming Partner, the Partnership, and the General
Partner shall treat the transaction between the General Partner and the
Redeeming Partner as a sale of the Redeeming Partner's Common Partnership Units
to the General Partner for federal income tax purposes. Each Redeeming Partner
agrees to execute such documents and take such other actions as the General
Partner may reasonably require in connection with the issuance of REIT Shares
upon exercise of the Redemption Right.
(c) The Partnership or the General Partner, as the case may be,
shall pay the Cash Amount to a Redeeming Partner as the Redemption Amount for
such Limited Partner if:
(i) the acquisition of REIT Shares by such Limited Partner
on the Specified Redemption Date would (A) result in such Limited
Partner or any other person owning, directly or indirectly REIT Shares
in excess of the "Ownership Limit," as defined in the Articles of
Incorporation, (B) result in REIT Shares being owned by fewer than one
hundred (100) persons (determined as provided by Section 856(a)(5) of
the Code), except as provided in the Articles of Incorporation, (C)
result in the General Partner being "closely held" within the meaning of
Section 856(h) of the Code, (D) cause the Company to own, directly or
constructively, ten percent (10%) or more of the ownership interests in
a tenant of the Company's or the Partnership's real property, within the
meaning of Section 856(d)(2)(B) of the Code, or (E) cause the
acquisition of REIT Shares by such Partner to be "integrated" with
38
69
any other distribution of REIT Shares or other securities of the Company
for purposes of complying with the registration provisions of the
Securities Act;
(ii) there is not an effective registration statement on
file with the Commission covering the Redemption Shares to be issued
upon the redemption of the Partnership Units described in the Notice of
Redemption for such Redeeming Partner (a) as of the Specified Redemption
Date, if the Cash Amount is less than the Threshold Cash Amount, and (b)
within 45 days of the Specified Redemption Date (and if such date is not
a Business Day, then the next Business Day) if the Cash Amount is more
than the Threshold Cash Amount; or
(iii) the Partnership or the General Partner, as the case
may be, so elects in its sole discretion.
Any Cash Amount to be paid to a Redeeming Partner pursuant to
this Section 8.5 shall be paid on the Specified Redemption Date; provided,
however, that if the Cash Amount to be paid to all Limited Partners who have
sent a Notice of Redemption during the period from the date of receipt of the
initial Notice of Redemption triggering a Specified Redemption Date and such
Specified Redemption Date exceeds $500,000 (the "Threshold Cash Amount"), then
such payment date may be extended for up to an additional one hundred eighty
(180) days to the extent required for the General Partner to cause additional
REIT Shares to be issued to provide financing to be used to make such payment of
the Cash Amount. Notwithstanding the foregoing, the General Partner and the
Partnership agree to use their best efforts to cause the closing of the
acquisition of redeemed Partnership Units hereunder to occur as quickly as
reasonably possible without incurring unreasonable expense.
(d) Each certificate, if any, evidencing REIT Shares that may be
issued in redemption of Partnership Units under Section 8.5 above (the
"Redemption Shares") shall bear a restrictive legend in substantially the
following form:
"The shares represented by this certificate have not been registered
under the Securities Act of 1933, as amended (the "Act"), or any state
securities law. No transfer of the Shares represented by this
certificate shall be valid or effective unless (A) such transfer is made
pursuant to an effective registration statement under the Act, or (B)
the holder of the securities proposed to be transferred shall have
delivered to the company either a no-action letter from the Securities
and Exchange Commission or an opinion of counsel (who may be an employee
of such holder) experienced in securities matters to the effect that
such proposed transfer is exempt from the registration requirements of
the act which opinion shall be reasonably satisfactory to the company."
(e) The Assignee of any Limited Partner may exercise the rights
of such Limited Partner pursuant to this Section 8.5, 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
39
70
Partner, the Cash Amount or REIT Shares Amount shall be paid by the Partnership
directly to such Assignee and not to such Limited Partner. Neither the Redeeming
Partner nor any Assignee of any Limited Partner shall have any right, with
respect to any Part nership Units so redeemed, to receive any distributions paid
after the Effective Date or the Specified Redemption Date.
(f) 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 herein contained to the contrary,
neither the General Partner nor the Partnership shall be under any obligation to
acquire Partnership Units which are or may be subject to any liens. Each Limited
Partner further agrees that, in the event any state or local property transfer
tax is payable as a result of the transfer of its Partnership Units to the
Partnership or the General Partner, such Limited Partner shall assume and pay
such transfer tax.
(g) Notwithstanding anything to the contrary herein, and, unless
otherwise indicated, with respect to the Redemption Right pursuant to this
Section 8.5:
(i) The consummation of such redemption shall be subject
to the expiration and termination of the applicable waiting period, if
any, under the Xxxx-Xxxxx-Xxxxxx Antitrust Improvement Act of 1976, as
amended.
(ii) The consummation of such redemption shall be subject
to and effected in compliance with all federal and state securities
laws.
(iii) The Redeeming Partner shall continue to own all
Partnership Units subject to any redemption for REIT Shares or the Cash
Amount and be treated as a Limited Partner with respect to such
Partnership Units for all purposes (other than as provided in Section
8.5(e) above) of this Agreement until such Partnership Units are
transferred to the Partnership or General Partner and the consideration
provided by this Section 8.5 is delivered in full on the Specified
Redemption Date. Until the issuance of the Redemption Shares the
Redeeming Partner shall have no rights as stockholder of the General
Partner.
(h) Notwithstanding any other provision of this Section 8.5,
unless Preferred Unitholders shall have converted their Preferred Partnership
Units into Common Partnership Units pursuant to conversion rights set forth in
the Certificate of Designation for their respective class of Preferred
Partnership Units, Preferred Unitholders shall not have the Redemption Rights
specified in this Section 8.5, but rather shall have such redemption rights, if
any, as are set forth in the Certificate of Designation for a particular class
of Preferred Partnership Units. In addition, the rights, if any, of the General
Partner to redeem a particular class of Preferred Partnership Units shall be set
forth in the Certificate of Designation applicable to such Preferred Partnership
Units.
8.6 REGISTRATION.
(a) Shelf Registration. In lieu of paying the Cash Amount to a
Redeeming Partner as the Redemption Amount pursuant to Section 8.5(c)(ii)
hereof, the General Partner may file within
40
71
the applicable time period required pursuant to Section 8.5(c)(ii) hereof a
shelf registration statement under Rule 415 of the Securities Act, or any
similar rule that may be adopted by the Commission (the "Shelf Registration"),
with respect to all of the Redemption Shares to be issued upon the redemption of
the Partnership Units described in the Notice of Redemption provided by the
Redeeming Partner entitled to payment under Section 8.5(c)(ii) hereof. The
General Partner may elect in its sole discretion to register any other
Redemption Shares pursuant to the Shelf Registration or any pre or
post-effective amendment thereto. The General Partner will use its best efforts
to have the Shelf Registration declared effective under the Securities Act as
soon as practicable after filing in order to permit the disposition of the
Registered Redemption Shares by the holders thereof in accordance with the
method or methods of disposition specified by the holders, and to keep the Shelf
Registration continuously effective until the earlier of (i) the second
anniversary of the date the Shelf Registration is declared effective by the
Commission (the "Shelf Registration Period"); (ii) the date when all of the
Registered Redemption Shares are sold thereunder, or (iii) the date on which all
of the holders of Registered Redemption Shares, pursuant to Rule 144(k) under
the Securities Act, may sell the Registered Redemption Shares without
registration under the Securities Act. The General Partner further agrees to
supplement or make amendments to the Shelf Registration, if required by the
rules, regulations or instructions applicable to the registration form utilized
by the Company or by the Securities Act or rules and regulations thereunder for
the Shelf Registration. Notwithstanding the foregoing, if for any reason the
effectiveness of the Shelf Registration is delayed or suspended or it ceases to
be available for sales of Registered Redemption Shares thereunder, the Shelf
Registration Period shall be extended by the aggregate number of days of such
delay, suspension or unavailability.
(b) Registration and Qualification Procedures. If and to the
extent the General Partner files the Shelf Registration pursuant to the
provisions of Section 8.6(a) above in lieu of making a payment of the Cash
Amount pursuant to Section 8.5(c)(ii) hereof, then the General Partner will,
subject to the provisions of Section 9.8 below:
(i) prepare and file with the Commission a registration
statement, including amendments thereof and supplements relating
thereto, with respect to the Redemption Shares, in connection with which
the General Partner will give each holder of Redemption Shares, their
underwriters, if any, and their counsel and accountants a reasonable
opportunity to participate in the preparation thereof and will give such
persons reasonable access to its books, records, officers and
independent public accountants;
(ii) use its best efforts to cause the registration
statement to be declared effective by the Commission;
(iii) keep the registration statement effective and the
related prospectus current throughout the Shelf Registration Period;
provided, however, that the General Partner shall have no obligation to
file any amendment or supplement at its own expense or the Partnership's
expense at any time in connection with any underwritten public offering;
41
72
(iv) furnish to each holder of Redemption Shares such
number of copies of prospectuses, and supplements or amendments thereto,
and such other documents as such holder reasonably requests;
(v) register or qualify the Redemption Shares covered by
the registration statement under the securities or blue sky laws of such
jurisdictions within the United States as any holder whose Redemption
Shares are covered by such registration statement shall reasonably
request, and do such other reasonable acts and things as may be required
of it to enable such holders to consummate the sale or other disposition
in such jurisdictions of the Redemption Shares; provided, however, that
the General Partner shall not be required to (i) qualify as a foreign
corporation or consent to a general and unlimited service or process in
any jurisdictions in which it would not otherwise be required to be
qualified or so consent or (ii) qualify as a dealer in securities;
(vi) furnish, at the request of the holders of Redemption
Shares, on the date Redemption Shares are delivered to the underwriters
for sale pursuant to such registration, or, if such Shares are not being
sold through underwriters, on the date the Shelf Registration with
respect to such Redemption Shares becomes effective, (A) a securities
opinion of counsel representing the General Partner for the purposes of
such registration covering such legal matters as are customarily
included in such opinions and (B) letters of the firm of independent
public accountants that certified the financial statements included in
the registration statement, addressed to the underwriters, covering
substantially the same matters as are customarily covered in
accountant's letters delivered to underwriters in underwritten public
offerings of securities and such other financial matters as such holders
(or the underwriters, if any) may reasonably request;
(vii) otherwise use its best efforts to comply with all
applicable rules and regulations of the Commission, and make available
to its stockholders as soon as reasonably practicable, but not later
than sixteen (16) months after the effective date of the Shelf
Registration, an earnings statement covering a period of at least twelve
(12) months beginning after the effective date of the Shelf
Registration, which earnings statement shall satisfy the provisions of
Section 11(a) of the Securities Act;
(viii) enter into and perform an underwriting agreement
with the managing underwriter, if any, selected as provided herein,
containing customary (A) terms of offer and sale of the securities,
payment provisions, underwriting discounts and commissions and (B)
representations, warranties, covenants, indemnities, terms and
conditions; and
(ix) keep the holders of Redemption Shares whose Shares
are included in such Shelf Registration advised as to the initiation and
progress of the registration.
(a) Allocation of Expenses. The Partnership shall pay all
expenses in connection with the Shelf Registration, including without limitation
(i) all expenses incident to filing with the National Association of Securities
Dealers, Inc., (ii) registration fees, (iii) printing expenses, (iv) accounting
and legal fees and expenses, except to the extent holders of Redemption Shares
whose
42
73
Shares are included in such Shelf Registration elect to engage accountants or
attorneys in addition to the accountants and attorneys engaged by the General
Partner, (v) accounting expenses incident to or required by any such
registration or qualification and (vi) expenses of complying with the securities
or blue sky laws of any jurisdictions in connection with such registration or
qualification; provided, however, the Partnership shall not be liable for (A)
any discounts or commissions to any underwriter or broker attributable to the
sale of Redemption Shares, or (B) any fees or expenses incurred by holders of
Redemption Shares in connection with such registration which, according to the
written instructions of any regulatory authority, the Partnership is not
permitted to pay. The Partnership shall not be required to pay any of the
expenses set forth in this Section 8.6(c)(i) through (vi) in connection with any
underwritten public offering after the Shelf Registration has been declared
effective, except to the extent that such underwritten public offering occurs
concurrently with the declaration of effectiveness of the Shelf Registration;
provided, however, that this sentence shall not affect the Partnership's
obligation to cooperate in connection with any such underwritten public
offering.
(b) Indemnification.
(i) In connection with the Shelf Registration, the
Partnership agrees to indemnify holders of Redemption Shares within the
meaning of Section 15 of the Securities Act, against all losses, claims,
damages, liabilities and expenses (including reasonable costs of
investigation) caused by any untrue, or alleged untrue, statement of a
material fact contained in the Shelf Registration, preliminary
prospectus or prospectus (as amended or supplemented if the General
Partner shall have furnished any amendments or supplements thereto) or
caused by any omission, or alleged omission, to state therein a material
fact required to be stated therein or necessary to make the statements
therein not misleading, except insofar as such losses, claims, damages,
liabilities or expenses are caused by any untrue statement, alleged
untrue statement, omission, or alleged omission based upon information
furnished to the General Partner expressly for use therein. The General
Partner and each officer, director and controlling person of the General
Partner shall be indemnified by each holder of Redemption Shares covered
by the Shelf Registration for all such losses, claims, damages,
liabilities and expenses (including reasonable costs of investigation)
caused by any such untrue, or alleged untrue, statement or any such
omission, or alleged omission, based upon information furnished to the
General Partner expressly for use therein in a writing signed by the
holder.
(ii) Promptly upon receipt by a party indemnified under
this Section 8.6(d) of notice of the commencement of any action against
such indemnified party in respect of which indemnity or reimbursement
may be sought against any indemnifying party under this Section 8.6(d),
such indemnified party shall notify the Partnership in writing of the
commencement of such action, but the failure to so notify the
Partnership shall not relieve it of any liability which it may have to
any indemnified party otherwise than under this Section 8.6(d) unless
such failure shall materially adversely affect the defense of such
action. In case notice of commencement of any such action shall be given
to the Partnership as above provided, the Partnership shall be entitled
to participate in and, to the extent it may wish, jointly with any other
indemnifying party similarly notified, to assume the defense of
43
74
such action at its own expense, with counsel chosen by it and reasonably
satisfactory to such indemnified party. The indemnified party shall have
the right to employ separate counsel in any such action and participate
in the defense thereof, but the fees and expenses of such counsel (other
than reasonable costs of investigation) shall be paid by the indemnified
party unless (i) the Partnership agrees to pay the same, (ii) the
General Partner fails to assume the defense of such action with counsel
reasonably satisfactory to the indemnified party or (iii) the named
parties to any such action (including any impleaded parties) have been
advised by such counsel that representation of such indemnified party
and the General Partner by the same counsel would be inappropriate under
applicable standards of professional conduct (in which case the General
Partner shall not have the right to assume the defense of such action on
behalf of such indemnified party). No indemnifying party shall be liable
for any settlement entered into without its consent.
(c) Contribution.
(i) If for any reason the indemnification provisions
contemplated by Section 8.6(d) are either unavailable or insufficient to
hold harmless an indemnified party in respect of any losses, claims,
damages or liabilities referred to therein, then the party that would
otherwise be required to provide indemnification or the indemnifying
party (in either case, for purposes of this Section 8.6(e), the
"Indemnifying Party") in respect of such losses, claims, damages or
liabilities, shall contribute to the amount paid or payable by the party
that would otherwise be entitled to indemnification or the indemnified
party (in either case, for purposes of this Section 8.6(e), the
"Indemnified Party") as a result of such losses, claims, damages,
liabilities or expense, in such proportion as is appropriate to reflect
the relative fault of the Indemnifying Party and the Indemnified Party,
as well as any other relevant equitable considerations. The relative
fault of the Indemnifying Party and Indemnified Party shall be
determined by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or omission or alleged
omission to state a material fact related to information supplied by the
Indemnifying Party or Indemnified Party, and the parties' relative
intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission. The amount paid or payable by a
party as a result of the losses, claims, damages, liabilities and
expenses referred to above shall be deemed to include any legal or other
fees or expenses reasonably incurred by such party. In no event shall
any holder of Redemption Shares covered by the Shelf Registration be
required to contribute an amount greater than the dollar amount of the
proceeds received by such holder from the sale of Redemption Shares
pursuant to the registration giving rise to the liability.
(ii) The parties hereto agree that it would not be just
and equitable if contribution pursuant to this Section 8.6(e) were
determined by pro rata allocation (even if the holders or any
underwriters or all of them were treated as one entity for such purpose)
or by any other method of allocation which does not take account of the
equitable considerations referred to in the immediately preceding
paragraph. No person or entity determined to have committed a fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities
Act) shall be entitled to contribution from any person or entity who was
not guilty of such fraudulent misrepresentation.
44
75
(iii) The contribution provided for in this Section 8.6(e)
shall survive the termination of this Agreement and shall remain in full
force and effect regardless of any investigation made by or on behalf of
any Indemnified Party.
(d) Listing on Securities Exchange. If the General Partner shall
list or maintain the listing of any shares of its common stock on any securities
exchange or national market system, it will at its expense and as necessary to
permit the registration and sale of the Redemption Shares hereunder, list
thereon, maintain and, when necessary, increase such listing to include such
Redemption Shares.
8.7 MEETINGS OF THE PARTNERS.
(a) Meetings of the Partners may be called by the General Partner
and shall be called upon the receipt by the General Partner of a written request
by Limited Partners holding ten percent (10%) or more of the Limited Partner
Interests, taking into account any Preferred Partnership Units that are
convertible into Common Partnership Units and are required by the Certificate of
Designation for the particular class of Preferred Partnership Units to be
counted for such purposes on an as-converted basis. Upon request in writing to
the General Partner by any person(s) entitled to call a meeting, the General
Partner shall cause notice to be given (not less than fifteen (15) nor more than
sixty (60) days after receipt of request) to the Limited Partners that a meeting
will be held at a time requested by the person(s) calling the meeting. 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 ten (10) days nor more than
sixty (60) days prior to the date of such meeting. Partners may vote in person
or by proxy at such meeting. Whenever the vote or consent of the Partners is
permitted or required under this Agreement, such vote or consent may be given at
a meeting of the Partners or may be given in accordance with the procedure
prescribed in Section 8.7 hereof. 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) 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),
taking into account any Preferred Partnership Units that are convertible into
Common Partnership Units and are required by the Certificate of Designation for
the particular class of Preferred Partnership Units to be counted for such
purposes on an as-converted basis. 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) 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
45
76
Partner or his attorney-in-fact. No proxy shall be valid after the expiration of
eleven (11) months from the date thereof unless otherwise provided in the proxy.
Every proxy shall be revocable at the pleasure of the Limited Partner executing
it, such revocation to be effective upon the Partnership's receipt of or written
notice of such revocation from the Limited Partner executing such proxy.
(d) Each meeting of Partners shall be conducted by the General
Partner or such other Person as the General Partner may appoint pursuant to such
rules for the conduct of the meeting as the General Partner or such other Person
deems appropriate in its sole discretion. Without limitation, meetings of
Partners may be conducted in the same manner as meetings of the stockholders of
the General Partner and may be held at the same time as, and as part of,
meetings of the stockholders of the General Partner.
ARTICLE IX
TRANSFERS OF LIMITED PARTNERSHIP INTERESTS
9.1 PURCHASE FOR INVESTMENT.
(a) Each Limited Partner hereby represents and warrants to the
General Partner and to the Partnership that the acquisition of his Partnership
Interest is made as a principal for his account for investment purposes only and
not with a view to the resale or distribution of such Partnership Interest.
(b) Each Limited Partner agrees that he will not sell, assign or
otherwise transfer his Partnership Interest or any fraction thereof, whether
voluntarily or by operation of law or at judicial sale or otherwise, to any
Person who does not make the representations and warranties to the General
Partner set forth in Section 9.1(a) above and similarly agree not to sell,
assign or transfer such Partnership Interest or fraction thereof to any Person
who does not similarly represent, warrant and agree.
9.2 RESTRICTIONS ON TRANSFER OF LIMITED PARTNERSHIP INTERESTS AND
REDEMPTION SHARES.
(a) Except as otherwise provided in Section 9.2(d) hereof, no
Limited Partner other than the General Partner may offer, sell, assign,
hypothecate, pledge or otherwise transfer his Limited Partnership Interest, in
whole or in part, whether voluntarily or by operation of law or at judicial sale
or otherwise (collectively, a "Transfer") without the written consent of the
General Partner, which consent may be withheld in the sole discretion of the
General Partner. The General Partner may require, as a condition of any
Transfer, that the transferor assume all costs incurred by the Partnership in
connection therewith.
(b) No Limited Partner may effect a Transfer of his Limited
Partnership Interest, in whole or in part, if, in the opinion of legal counsel
for the Partnership, such proposed Transfer would require the registration of
the Limited Partnership Interest under the Securities Act, or would
46
77
otherwise violate any applicable federal or state securities or "Blue Sky" law
(including investment suitability standards).
(c) No transfer by a Limited Partner of his or its Partnership
Units, in whole or in part, may be made to any Person if: (i) in the opinion of
legal counsel for the Partnership, the transfer would result in the
Partnership's being treated as an association taxable as a corporation (other
than a qualified REIT subsidiary within the meaning of Section 856(i) of the
Code); (ii) such transfer is effectuated through an "established securities
market" or a "secondary market (or the substantial equivalent thereof)" within
the meaning of Section 7704 of the Code; (iii) such transfer would cause the
Partnership to become, with respect to any employee benefit plan subject to
Title I of ERISA, a "party-in-interest" (as defined in Section 3(14) of ERISA)
or a "disqualified person" (as defined in Section 4975(c) of the Code); or (iv)
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 to Department of Labor Regulations Section 2510.2-101.
(d) Section 9.2(a) shall not apply to the following transactions,
except as they may be prohibited by Section 9.2(h) and except that the General
Partner may require that the transferor assume all costs incurred by the
Partnership in connection therewith:
(i) any Transfer by a Limited Partner pursuant to the
exercise of its Redemption Right under Section 8.5 hereof;
(ii) any Transfer by a Limited Partner that is a
corporation or other business entity to any of its Affiliates or
subsidiaries or to any successor in interest of such Limited Partner;
(iii) any donative Transfer by an individual Limited
Partner to his immediate family members or any trust in which the
individual or his immediate family members own, collectively, one
hundred percent (100%) of the beneficial interests. For purposes of this
Section 9.2(d)(iii), the term "immediate family member" shall be deemed
to include only an individual Limited Partner's spouse, children and
grandchildren;
(iv) any Transfer described in Section 9.3(a)(vii); or
(v) any Transfer of Preferred Partnership Units that is
expressly permitted under the Certificate of Designation for a
particular class of Preferred Partnership Units.
(e) Notwithstanding Section 9.2(a) to the contrary, any Limited
Partner (including the Additional Limited Partners) may pledge, encumber or
hypothecate ("Pledge") all or any portion of his Limited Partnership Interest
upon satisfaction of each of the following conditions:
(i) the General Partner shall have determined in the
exercise of its reasonable judgment that such Pledge will not either
jeopardize the status of the Partnership as a partnership for federal or
state income tax purposes or otherwise create any adverse tax
47
78
consequences to the Partnership or result in a transfer that might
jeopardize any exemption from registration under federal or state
securities laws;
(ii) the pledgee of the Pledge shall either be (i) an
institutional lender; or (ii) a non-institutional lender reasonably
acceptable to the General Partner; and
(iii) the Limited Partner making the Pledge shall provide
a copy of all documents evidencing the Pledge or relating to the Pledge
transaction and reimburse the Partnership for all reasonable costs and
expenses incurred by the Partnership in connection with such Pledge.
(f) Any Transfer in contravention of any of the provisions of
this Article IX shall be void ab initio and ineffectual and shall not be binding
upon, or recognized by, the Partnership.
(g) Transfers pursuant to this Article IX may only be made on the
first Business Day of a fiscal quarter of the Partnership, unless the General
Partner otherwise agrees.
(h) Notwithstanding anything in this Agreement to the contrary:
(i) Flagstaff Hotel Assets, Inc. and Tucson Desert Assets,
Inc. in their capacity as a Limited Partner and any successors thereto
or assignees thereof, as well as any Person who becomes a Limited
Partner after the effective date of this Agreement, shall not sell any
Redemption Shares at any time if such sale could reasonably be expected
to result in a violation of any applicable law or regulation due to any
other securities offering or transaction by the General Partner or any
administrator or agent for the General Partner's Dividend Reinvestment
Plan;
(ii) any Person who becomes a Limited Partner after the
effective date of this Agreement shall not, unless the General Partner
in its sole discretion consents in writing, convey, assign, distribute
or otherwise voluntarily or involuntarily transfer (other than a Pledge
permitted by Section 9.2(e)) to any Person, including any shareholder,
any of the Partnership Units (or any other substitute securities or
other securities received on account of such Partnership Units) held by
any such Limited Partners, for a period of one year from the date such
Partnership Units were issued to such Limited Partners; and
(iii) the following Limited Partners shall not, unless the
General Partner in its sole discretion consents in writing, convey,
assign, distribute or otherwise voluntarily or involuntarily transfer
(other than a Pledge permitted by Section 9.2(e)) to any Person,
including any other Partner, any of the Partnership Units (or any other
substitute securities or other securities received on account of such
Partnership Units) held by such Limited Partners, at any time prior to
the date listed next to each such Limited Partner's name, as follows:
(1) Flagstaff Hotel Assets, Inc. and Tucson Desert Assets, Inc. (October
29, 1997), (2) Xxxxxxx, LLC (January 17, 1998), and (3) O.T. Hill, LLC
(November 28, 1997).
48
79
9.3 ADMISSION OF SUBSTITUTE LIMITED PARTNER.
(a) Subject to the other provisions of this Article IX, an
assignee of the Limited Partnership Interest of a Limited Partner (which shall
be understood to include any purchaser, transferee, donee, or other recipient of
any disposition of such Limited Partnership Interest) shall be deemed admitted
as a Limited Partner of the Partnership only upon the satisfactory completion of
the following:
(i) The assignee shall have accepted and agreed to be
bound by the terms and provisions of this Agreement by executing a
counterpart or an amendment thereof, and such other documents or
instruments as the General Partner may require in order to effect the
admission of such Person as a Limited Partner.
(ii) To the extent required, an amended Certificate
evidencing the admission of such Person as a Limited Partner shall have
been signed, acknowledged and filed for record in accordance with the
Act.
(iii) The assignee shall have delivered a letter
containing the representation set forth in Section 9.1(a) hereof and the
agreement set forth in Section 9.1(b) hereof.
(iv) If the assignee is a corporation, partnership or
trust, the assignee shall have provided the General Partner with
evidence satisfactory to counsel for the Partnership of the assignee's
authority to become a Limited Partner under the terms and provisions of
this Agreement.
(v) The assignee shall have executed a power of attorney
containing the terms and provisions set forth in Section 8.2 hereof.
(vi) The assignee shall have paid all reasonable legal
fees of the Partnership and the General Partner and filing and
publication costs in connection with his substitution as a Limited
Partner.
(vii) The assignee has obtained the prior written consent
of the General Partner to its admission as a Substitute Limited Partner,
which consent may be given or denied in the exercise of the General
Partner's sole and absolute discretion; provided, however, that subject
to Section 9.8 below, the General Partner hereby agrees to consent to
the admission of any Assignee of any Limited Partner who was a party to
this Agreement as of August 16, 1995 described in Section 9.2(f) (by
distribution in accordance with the terms of the partnership agreement
or other applicable governing agreement of such Limited Partner), which
consent shall be effective with no further action by the General Partner
upon the execution of such assignment by such Limited Partner to such
Assignee.
(b) For the purpose of allocating profits and losses and
distributing cash received by the Partnership, a Substitute Limited Partner
shall be treated as having become, and appearing in the records of the
Partnership as, a Partner upon the filing of the Certificate described in
Section
49
80
9.3(a)(ii) hereof or, if no such filing is required, the later of the date
specified in the transfer documents or the date on which the General Partner has
received all necessary instruments of transfer and substitution.
(c) The General Partner shall cooperate with the Person seeking
to become a Substitute Limited Partner by preparing the documentation required
by this Section and making all official filings and publications. The
Partnership shall take all such action as promptly as practicable after the
satisfaction of the conditions in this Article IX to the admission of such
Person as a Limited Partner of the Partnership.
9.4 RIGHTS OF ASSIGNEES OF PARTNERSHIP INTERESTS.
(a) Subject to the provisions of Sections 9.1 and 9.2 hereof,
except as required by operation of law, the Partnership shall not be obligated
for any purposes whatsoever to recognize the assignment by any Limited Partner
of his Partnership Interest until the Partnership has received notice thereof.
(b) Any Person who is the assignee of all or any portion of a
Limited Partner's Limited Partnership Interest, but does not become a Substitute
Limited Partner and desires to make a further assignment of such Limited
Partnership Interest, shall be subject to all the provisions of this Article IX
to the same extent and in the same manner as any Limited Partner desiring to
make an assignment of his Limited Partnership Interest.
9.5 EFFECT OF BANKRUPTCY, DEATH, INCOMPETENCE OR TERMINATION OF A
LIMITED PARTNER. The occurrence of an Event of Bankruptcy as to a Limited
Partner, the death of a Limited Partner or a final adjudication that a Limited
Partner is incompetent (which term shall include, but not be limited to,
insanity) shall not cause the termination or dissolution of the Partnership, and
the business of the Partnership shall continue if an order for relief in a
bankruptcy proceeding is entered against a Limited Partner, the trustee or
receiver of his estate or, if he dies, his executor, administrator or trustee,
or, if he is finally adjudicated incompetent, his committee, guardian or
conservator, shall have the rights of such Limited Partner for the purpose of
settling or managing his estate property and such power as the bankrupt,
deceased or incompetent Limited Partner possessed to assign all or any part of
his Partnership Interest and to join with the assignee in satisfying conditions
precedent to the admission of the assignee as a Substitute Limited Partner.
9.6 JOINT OWNERSHIP OF INTERESTS. A Partnership Interest may be acquired
by two individuals as joint tenants with right of survivorship, provided that
such individuals either are married or are related and share the same home as
tenants in common. The written consent o vote of both owners of any such jointly
held Partnership Interest shall be required to constitute the action of the
owners of such Partnership Interest; provided, however, that the written consent
of only one joint owner will be required if the Partnership has been provided
with evidence satisfactory to the counsel for the Partnership that the actions
of a single joint owner can bind both owners under the applicable laws of the
state of residence of such joint owners. Upon the death of one owner of a
Partnership Interest held in a joint tenancy with a right of survivorship, the
Partnership Interest shall become owned solely by the survivor as a Limited
Partner and not as an Assignee. The Partnership
50
81
need not recognize the death of one of the owners of a jointly-held Partnership
Interest until it shall have received notice of such death. Upon notice to the
General Partner from either owner, the General Partner shall cause the
Partnership Interest to be divided into two equal Partnership Interests, which
shall thereafter be owned separately by each of the former owners.
9.7 ASSIGNMENT OF ALL PARTNERSHIP UNITS. Any Limited Partner who shall
transfer all of his Partnership Units in a transfer permitted pursuant to this
Article IX shall cease to be a Limited Partner upon the admission of all
Assignees of such Partnership Units as Substitute Limited Partners. Similarly,
any Limited Partner who shall transfer all of his Partnership Units pursuant to
a redemption of all of his Partnership Units under Section 8.5 shall cease to be
a Limited Partner.
9.8 LIMITATION ON TRANSFER OF PARTNERSHIP UNITS AND OTHER RIGHTS TO
AVOID ADVERSE TAX EFFECTS. Notwithstanding any provision in this Agreement to
the contrary, no transfer or purported transfer by any Limited Partner of any
Partnership Interest or Partnership Units, nor exercise of any redemption right
under Section 8.5, nor exercise of any registration rights under Section 8.5,
nor exercise of any other right or benefit provided under this Agreement shall
be effective or of any force or effect if as a result of the exercise or
purported exercise of any such right, the Partnership will be taxed as a
corporation, association or publicly traded partnership, rather than as a
limited partnership, under the Code, any Regulations, or any administrative
pronouncements of the Internal Revenue Service. The General Partner's
determination as to whether a particular transfer, exercise of redemption
rights, exercise of registration rights, or exercise of any other right or
benefit will or may cause an adverse tax treatment to the Partnership shall be
conclusive and binding on the Limited Partners.
ARTICLE X
BOOKS AND RECORDS: ACCOUNTING: TAX MATTERS
10.1 BOOKS AND RECORDS. At all times during the continuance of the
Partnership, the Partners shall keep or cause to be kept at the Partnership's
specified office true and complete books of account in accordance with generally
accepted accounting principles, including: (a) a current list of the full name
and last known business address of each Partner, (b) a copy of the Certificate
of Limited Partnership and all certificates of amendment thereto, (c) copies of
the Partnership's federal, state and local income tax returns and reports, (d)
copies of the Agreement and any financial statements of the Partnership for the
three most recent years and (e) all documents and information required under the
Act. Any Partner or his duly authorized representative, upon paying the costs of
collection, duplication and mailing, shall be entitled to inspect or copy such
records during ordinary business hours.
10.2 CUSTODY OF PARTNERSHIP FUNDS: BANK ACCOUNTS.
(a) All funds of the Partnership not otherwise invested under
Section 10.2(b) below shall be deposited in one or more accounts maintained in
such banking or brokerage
51
82
institutions as the General Partner shall determine, and withdrawals shall be
made only on such signature or signatures as the General Partner may, from time
to time, determine.
(b) All deposits and other funds not needed in the operation of
the business of the Partnership and deposited in accordance with Section 10.2(a)
above, shall be invested by the General Partner in any of the following dollar
denominated investments: (i) marketable direct obligations issued or
unconditionally guaranteed by the United States government or issued by any
agency thereof and backed by the full faith and credit of the United States;
(ii) marketable direct obligations issued by any state of the United States or
any political subdivision of any such state or any public instrumentality
thereof and, at the time of acquisition, having an investment grade rating from
either Standard & Poor's Corporation ("S&P") or Xxxxx'x Investors Service, Inc.
("Xxxxx'x"); (iii) publicly traded commercial paper bearing at the time of
acquisition an investment grade rating either of S&P or Xxxxx'x issued by United
States, Australian, Canadian, European or Japanese bank holding companies or
industrial or financial companies; (iv) certificates of deposit issued by and
bankers acceptances of and interest bearing deposits with any United States,
Canadian, European or Japanese commercial banks either (x) is the lender of
Non-discharged Indebtedness but only up to 125% of the amount of such Lender's
Non-discharged indebtedness or (y) having capital and surplus of at least
$100,000,000 or the equivalent and which issues (or the parent of which issues)
commercial paper or other short term securities bearing an investment grade
rating from either S&P or Moody's; and (v) money market funds organized under
the laws of the United States or any state thereof that invest solely in any of
the foregoing investments permitted under clauses (i), (ii), (iii), and (iv).
The funds of the Partnership shall not be commingled with the funds of any other
Person except for such commingling as may necessarily result from an investment
in those investment companies permitted by this Section 10.2(b).
10.3 FISCAL AND TAXABLE YEAR. The fiscal and taxable year of the
Partnership shall be the calendar year.
10.4 ANNUAL TAX INFORMATION AND REPORT. Within seventy-five (75) days
after the end of each fiscal year of the Partnership, the General Partner shall
furnish to each Person who was a Limited Partner at any time during such year
the tax information necessary to file such Limited Partner's individual tax
returns as shall be reasonably required by law.
10.5 TAX MATTERS PARTNER; TAX ELECTIONS; SPECIAL BASIS ADJUSTMENTS.
(a) The General Partner shall be the "Tax Matters Partner" of the
Partnership within the meaning of Section 6231(a)(7) of the Code. As Tax Matters
Partner, the General Partner shall have the right and obligation to take all
actions authorized and required, respectively, by the Code for the Tax Matters
Partner. The General Partner shall have the right to retain professional
assistance in respect of any audit of the Partnership by the Service and all
out-of-pocket expenses and fees incurred by the General Partner on behalf of the
Partnership as Tax Matters Partner shall constitute Administrative Expenses. In
the event the General Partner receives notice of a final Partnership adjustment
under Section 6223(a)(2) of the Code, the General Partner shall either (i) file
a court petition for judicial review of such final adjustment within the period
provided under Section 6226(a) of the Code, a copy of which petition shall be
mailed to all Limited Partners on the date such
52
83
petition is filed, or (ii) mail a written notice to all Limited Partners, within
such period, that describes the General Partner's reasons for determining not to
file such a petition.
(b) All elections required or permitted to be made by the
Partnership under the Code shall be made by the General Partner in its sole
discretion.
(c) In the event of a transfer of all or any part of the
Partnership Interest of any Partner, the Partnership, at the option of the
General Partner, may elect pursuant to Section 754 of the Code to adjust the
basis of the Properties. Notwithstanding anything contained in Article V of this
Agreement, any adjustments made pursuant to Section 754 shall affect only the
successor in interest to the transferring Partner and in no event shall be taken
into account in establishing, maintaining or computing Capital Accounts for the
other Partners for any purpose under this Agreement. Each Partner will furnish
the Partnership with all information necessary to give effect to such election.
10.6 REPORTS TO LIMITED PARTNERS.
(a) The books of the Partnership shall be audited annually as of
the end of each fiscal year of the Partnership by accountants selected by the
General Partner, who shall be the same accountants responsible for the
examination of the General Partner's books. The General Partner shall determine
and prepare an annual balance sheet, a statement of partners' capital as of the
end of such year, as well as statements of cash flow and income, all in
accordance with generally accepted accounting principles and accompanied by an
independent auditor's report (collectively, the "Financial Statements"),
together with all supplementary schedules and information prepared by the
accountants related thereto. As a note to such Financial Statements, the General
Partner shall prepare a schedule of all loans to the Partnership. Such schedule
shall demonstrate that loans have been made, used, carried on the books of the
Partnership (and repaid, if applicable) in accordance with the provisions of
this Agreement.
As soon as practicable, but in no event later than one hundred
five (105) days after the close of each fiscal year, or such later date as they
are filed with the Commission by the General Partner, the General Partner shall
cause to be mailed to each Limited Partner as of the close of the fiscal year,
an annual report containing Financial Statements of the Partnership, or of the
General Partner if such statements are prepared solely on a consolidated basis
with the General Partner, for such year. As soon as practicable, but in no event
later than forty-five (45) days after the close of each calendar quarter (except
the last calendar quarter of each year), or such later date as they are filed
with the Commission by the General Partner, the General Partner shall cause to
be mailed to each Limited Partner as of the last day of the calendar quarter, a
report containing unaudited financial statements of the Partnership, or of the
General Partner, if such statements are prepared solely on a consolidated basis
with the General Partner, and such other information as may be required by
applicable law or regulation, or as the General Partner determines to be
appropriate.
(b) Any Partner shall further have the right to a private audit
of the books and records of the Partnership, provided such audit is made for
Partnership purposes, at the expense of the Partner desiring it and is made
during normal business hours.
53
84
10.7 TITLE TO PARTNERSHIP ASSETS. Title to Partnership assets, whether
real, personal or mixed and whether tangible or intangible, shall be deemed to
be owned by the Partnership as an entity, and no Partner, individually or
collectively, shall have any ownership interest in such Partnership assets or
any portion thereof. Title to any or all of the Partnership assets may be held
in the name of the Partnership, the General Partner or one or more nominees, as
the General Partner may determine, including Affiliates of the General Partner.
The General Partner hereby declares and warrants that any Partnership assets for
which legal title is held in the name of the General Partner or any nominee or
Affiliate of the General Partner shall be held by the General Partner for the
use and benefit of the Partnership in accordance with the provisions of this
Agreement; provided, however, that the General Partner shall use its best
efforts to cause beneficial and record title to such assets to be vested in the
Partnership as soon as reasonably practicable. All Partnership assets shall be
recorded as the property of the Partnership in its books and records,
irrespective of the name in which legal title to such Partnership assets is
held.
10.8 RELIANCE BY THIRD PARTIES. Notwithstanding anything to the contrary
in this Agreement, any Person dealing with the Partnership shall be entitled to
assume that the General Partner has full power and authority, without consent or
approval of any other Partner or Person, to encumber, sell or otherwise use in
any manner any and all assets of the Partnership and to enter into any contracts
on behalf of the Partnership, and take any and all actions on behalf of the
Partnership and such Person shall be entitled to deal with the General Partner
as if the General Partner were the Partnership's sole party in interest, both
legally and beneficially. Each Limited Partner hereby waives any and all
defenses or other remedies which may be available against such Person to
contest, negate or disaffirm any action of the General Partner in connection
with any such dealing. In no event shall any Person dealing with the General
Partner or its representatives be obligated to ascertain that the terms of this
Agreement have been complied with or to inquire into the necessity or expedience
of any act or action of the General Partner or its representatives. Each and
every certificate, document, or other instrument executed on behalf of the
Partnership by the General Partner or its representatives shall be conclusive
evidence in favor of any and every Person relying thereon or claiming thereunder
that (i) at the time of the execution and delivery of such certificate, document
or instrument, this Agreement was in full force and effect, (ii) the Person
executing and delivering such certificate, document or instrument was duly
authorized and empowered to do so for and on behalf of the Partnership and (iii)
such certificate, document or instrument was duly executed and delivered in
accordance with the terms and provisions of this Agreement and is binding upon
the Partnership.
10.9 WITHHOLDING. Each Limited Partner hereby authorizes the Partnership
to withhold from or pay on behalf of or with respect to such Limited Partner any
amount of federal, state, local, or foreign taxes that the General Partner
determines that the Partnership is required to withhold or pay with respect to
any amount distributable or allocable to such Limited Partner pursuant to this
Agreement, including, without limitation, any taxes required to be withheld or
paid by the Partnership pursuant to Sections 1441, 1442, 1445, or 1446 of the
Code. Any amount paid on behalf of or with respect to a Limited Partner shall
constitute a loan by the Partnership to such Limited Partner, which loan shall
be repaid by such Limited Partner within fifteen (15) days after notice from the
General Partner that such payment must be made unless (i) the Partnership
withholds such payment from a distribution which would otherwise be made to the
Limited Partner or (ii) the
54
85
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 10.9. Any amounts payable by a Limited Partner hereunder shall bear
interest at the lesser of (A) the base rate on corporate loans at large United
States money center commercial banks, as published from time to time in the Wall
Street Journal, plus one (1) percentage points, or (B) the maximum lawful rate
of interest on such obligation, such interest to accrue from the date such
amount is due (i.e., fifteen (15) days after demand) until such amount is paid
in full. Each Limited Partner shall take such actions as the Partnership or the
General Partner shall request in order to perfect or enforce the security
interest created hereunder.
ARTICLE XI
AMENDMENT OF AGREEMENT
The General Partner, without the consent of the Limited Partners, may
amend this Agreement in any respect; provided, however, that the following
amendments shall require the consent of Limited Partners holding more than
sixty-six and two-thirds percent (66-2/3%) of the Percentage Interests of the
Limited Partners (excluding the Percentage Interests held in the name of the
General Partner of the Partnership, or held by any entity which is controlled by
the General Partner, whether as the General Partner or a Limited Partner):
(a) any amendment affecting the operation of the Conversion
Factor, the Redemption Rights, or the Shelf Registration under Section 8.6
hereof;
(b) any amendment that would adversely affect the rights of the
Limited Partners to receive the distributions payable to them hereunder.
(c) any amendment that would alter the Partnership's allocations
of Profit and Loss to the Limited Partners, other than (i) an amendment
(including attaching a new Certificate of Designation hereto) to issue a new
class of Preferred Partnership Units or (ii) an amendment to admit a new Limited
Partner provided such amendment to the allocations of Profit and Loss did not
have an adverse effect on the existing Limited Partners; or
(d) any amendment that would impose on the Limited Partners any
obligation to make additional Capital Contributions to the Partnership.
In determining what number of Partnership Units constitutes the
requisite 66-2/3% consent for any of the amendments enumerated above, Preferred
Partnership Units (other than those held in the name of the General Partner or
an entity controlled by the General Partner, whether as the General Partner or a
limited partner) shall be taken into account to the extent that, with respect to
55
86
a particular purpose enumerated above, the Certificate of Designation for a
particular class of Preferred Partnership Units provides for conversion of such
units into Common Partnership Units and provides that such Preferred Partnership
Units shall vote on an as-converted basis. In addition to any of the voting
rights that Preferred Unitholders may have under this Article X, Preferred
Unitholders shall have such other voting rights, protective rights or similar
rights as set forth in the Certificate of Designation for a particular class of
Preferred Partnership Units.
ARTICLE XII
GENERAL PROVISIONS
12.1 NOTICES. All communications required or permitted under this
Agreement shall be in writing and shall be deemed to have been given when
delivered personally or upon deposit in the United States mail, registered,
postage prepaid return receipt requested, to the Partners at the addresses set
forth in the Unitholder Ledger; provided, however, that any Partner may specify
a different address by notifying the General Partner in writing of such
different address. Notices to the Partnership shall be delivered at or mailed to
its specified office.
12.2 SURVIVAL OF RIGHTS. Subject to the provisions hereof limiting
transfers, this Agreement shall be binding upon and inure to the benefit of the
Partners and the Partnership and their respective legal representatives,
successors, transferees and assigns.
12.3 ADDITIONAL DOCUMENTS. Each Partner agrees to perform all further
acts and execute, swear to, acknowledge and deliver all further documents which
may be reasonable, necessary, appropriate or desirable to carry out the
provisions of this Agreement or the Act.
12.4 SEVERABILITY. If any provision of this Agreement shall be declared
illegal, invalid, or unenforceable in any jurisdiction, then such provision
shall be deemed to be severable from this Agreement (to the extent permitted by
law) and in any event such illegality, invalidity or unenforceability shall not
affect the remainder hereof.
12.5 ENTIRE AGREEMENT. This Agreement and exhibits attached hereto
constitute the entire Agreement of the Partners and supersede all prior written
agreements and prior and contemporaneous oral agreements, understandings and
negotiations with respect to the subject matter hereof.
12.6 PRONOUNS AND PLURALS. When the context in which words are used in
the Agreement indicates that such is the intent, words in the singular number
shall include the plural and the masculine gender shall include the neuter or
female gender as the context may require.
12.7 HEADINGS. The Article headings or sections in this Agreement are
for convenience only and shall not be used in construing the scope of this
Agreement or any particular Article.
12.8 COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original copy and all of
which together shall constitute one and the
56
87
same instrument binding on all parties hereto, notwithstanding that all parties
shall not have signed the same counterpart.
12.9 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.
12.10 APPLICABLE LAW. This Agreement shall be construed and enforced in
accordance with and governed by the laws of the State of Delaware (other than
the law governing the choice of law), without regard to the principles of
conflicts of law. In the event of a conflict between the provisions of this
Agreement and any nonmandatory provision of the Act, the provisions of this
Agreement shall control and take precedence.
12.11 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.
12.12 NO RIGHTS AS STOCKHOLDERS. Nothing contained in this Agreement
shall be construed as conferring upon the holders of the Partnership Units any
rights whatsoever as stockholders of the General Partner, including, without
limitation, any right to receive dividends or other distributions made to
stockholders of the General Partner or to vote or to consent or to receive
notice as stockholders in respect of any meeting of stockholders for the
election of directors of the General Partner or any other matter.
12.13 PARTITION. No Partner nor any successor-in-interest to a Partner
shall have the right while this Agreement remains in effect to have any property
of the Partnership partitioned, or to file a complaint or to institute any
proceeding at law or in equity to have such property of the Partnership
partitioned, and each Partner, on behalf of itself and its successors and
assigns hereby waives any such right. It is the intention of the Partners that
the rights of the parties hereto and their successors-in-interest to Partnership
property, as among themselves, shall be governed by the terms of this Agreement,
and that the rights of the Partners and their successors-in-interest shall be
subject to the limitations and restrictions as set forth in this Agreement.
12.14 NO THIRD-PARTY RIGHTS CREATED HEREBY. The provisions of this
Agreement are solely for the purpose of defining the interests of the partners,
inter se; and no other person, firm or entity (i.e., a party who is not a
signatory hereto or a permitted successor to such signatory hereto) shall have
any right, power, title or interest by way of subrogation or otherwise, in and
to the rights, powers, title and provisions of this Agreement.
[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
57
88
IN WITNESS WHEREOF, the parties hereto have hereunder affixed their
signatures to this Agreement, all as of the date first hereinabove written.
GENERAL PARTNER LIMITED PARTNERS
SUNSTONE HOTEL INVESTORS, INC., SUNSTONE HOTEL INVESTORS, INC.,
a Maryland corporation and the sole a Maryland corporation, as a Limited
General Partner Partner
By: /s/ XXXXXX X. ALTER By: /s/ XXXXXX X. ALTER
----------------------------- -------------------------------
Xxxxxx X. Alter Xxxxxx X. Alter
Its: President Its: President
/s/ XXXXXX X. ALTER
------------------------------------
XXXXXX X. ALTER
/s/ C. XXXXXX XXXXXX
------------------------------------
C. XXXXXX XXXXXX
/s/ XXXXXXX X. XXXXXXXXX
------------------------------------
XXXXXXX X. XXXXXXXXX
MYPC PARTNERS,
a general partnership
By: /s/ XXXX XXXXXXXX
------------------------------------
Xxxx Xxxxxxxx
Its: General Partner
------------------------------------
XXXXXXX X. XXX XXXX
/s/ XXX XXXXX
------------------------------------
XXX XXXXX
89
/s/ XXXXXX X. XXXXX
------------------------------------
XXXXXX X. XXXXX, TRUSTEE
/s/ XXXXXX X. XXXXX
------------------------------------
XXXXXX X. XXXXX
TRUST COMPANY OF AMERICA,
for the benefit of Xxxxxxx X. Xxxxxx
By: /s/ Trust Company of America
------------------------------------
Name:
Its:
ENEVER ROUTT INVESTMENT
GROUP, LTD, a limited partnership
By: /s/ C. XXXXXX XXXXXX
------------------------------------
C. Xxxxxx Xxxxxx
Its: General Partner
ALTER INVESTMENT GROUP, LTD, a
limited partnership
By: /s/ XXXXXX X. ALTER
------------------------------------
Xxxxxx X. Alter
Its: General Partner
INNS PROPERTIES, a California limited
partnership, formerly known as Inns
Properties I, a California limited
partnership
By INSPAC, LTD., a Delaware corporation,
formerly (and, in California, still
known as) XXXXX, LTD., a General Partner
By:
------------------------------------
Xxxxxxx X. Xxxx
Its: President
90
RIVERSIDE HOTEL PARTNERS, INC.,
a California Corporation
By: /s/ XXXXXX X. ALTER
------------------------------------
Xxxxxx X. Alter
Its: President
FLAGSTAFF HOTEL ASSETS, INC.,
an Arizona corporation
By: /s/ XXXXXX XXXXXX
------------------------------------
Xxxxxx Xxxxxx
Its: President
TUCSON DESERT ASSETS, INC.,
an Arizona corporation
By: /s/ XXXXXX XXXXXX
------------------------------------
Xxxxxx Xxxxxx
Its: President
XXXXX XXXXXX & XXXXXXX XXXXXX,
as Joint Tenants
------------------------------------
Xxxxx Xxxxxx
------------------------------------
Xxxxxxx Xxxxxx
CHANING DARRTEN HAMLET TRUST
By:
------------------------------------
, TRUSTEE
---------------------------
XXXXXXX XXXXXX HAMLET TRUST
By:
------------------------------------
, TRUSTEE
---------------------------
91
XXXXX XXXXXX HAMLET TRUST
By:
------------------------------------
, TRUSTEE
---------------------------
XXXXX FAMILY PARTNERSHIP
By: /s/ XXXXXX X. XXXXX
------------------------------------
Xxxxxx X. Xxxxx
Its: Partner
------------------------------------
XXXXXX XXXXXX
------------------------------------
XXXXXX X. XXXXXX
/s/ XXXXXX XXXXX
------------------------------------
XXXXXX XXXXX
O.T. HILL, LLC,
a Delaware limited liability company
By: /s/ XXXX X. XXXXXXXX
------------------------------------
Xxxx X. Xxxxxxxx
Its: President
XXXXX X. XXXXXXX, Personal
Representative of the Estate of
Xxxxxxxxx Xxxxxxx XX a/k/a
Xxxx Xxxxxxx XX deceased
/s/ XXXXX X. XXXXX
------------------------------------
XXXXX X. XXXXX, TRUSTEE
92
/s/ XXXXXX X. XXXXXXXX
------------------------------------
XXXXXX X. XXXXXXXX, TRUSTEE
/s/ XXXXXX X. XXXXXXXX
------------------------------------
XXXXXX X. XXXXXXXX
/s/ XXXXXX X. XXXXXXXX
------------------------------------
XXXXXX X. XXXXXXXX, TRUSTEE
/s/ XXXXXX X. XXXXX
------------------------------------
XXXXXX X. XXXXX
/s/ XXXXX X. XXXXXX
------------------------------------
XXXXX X. XXXXXX
------------------------------------
XXXXXXX X. XXXXXXX
/s/ XXXXXX X. XXXXXX
------------------------------------
XXXXXX X. XXXXXX
C. XXXXXX XXXXXX & XXXXXX X.
XXXXXX, as Joint Tenants
/s/ C. XXXXXX XXXXXX
------------------------------------
C. Xxxxxx Xxxxxx
/s/ XXXXXX X. XXXXXX
------------------------------------
Xxxxxx X. Xxxxxx
/s/ XXXXX X. XXXXXX
------------------------------------
XXXXX X. XXXXXX, TRUSTEE
93
XXXXX XXXXXX & XXXXXX XXXXXX,
as Joint Tenants
/s/ XXXXX XXXXXX
------------------------------------
Xxxxx Xxxxxx
/s/ XXXXXX XXXXXX
------------------------------------
Xxxxxx Xxxxxx
XXXXXX X. XXXXXXXX &
XXXXXXXXX X. XXXXX, as Joint Tenants
------------------------------------
Xxxxxx X. Xxxxxxxx
------------------------------------
Xxxxxxxxx X. Xxxxx
XXXXX X. XXXXXXX & JUNE X.
XXXXXXX, as Joint Tenants
------------------------------------
Xxxxx X. Xxxxxxx
------------------------------------
June A. Xxxxxxx
XXXXXXX LLC, a California Limited
Liability Company
By: /s/ XXXXXX XXXXX
------------------------------------
Xxxxxx Xxxxx
Its: Member
PEACOCK LLC, a California Limited
Liability Company
By: /s/ XXXXXX XXXXX
------------------------------------
Xxxxxx Xxxxx
Its: Member
94
/s/ XXX X. XXXX
------------------------------------
TRUSTEE FOR XXXXXX X. XXXX
REVOCABLE TRUST
/s/ XXXXXXX X. XXXX
------------------------------------
XXXXXXX X. XXXX, TRUSTEE
/s/ XXXXXXX X. XXXXXXX
------------------------------------
XXXXXXX X. XXXXXXX
XXXXXXX X. XXXXXX & XXXXXX X.
XXXXXX, as Joint Tenants
------------------------------------
Xxxxxxx X. Xxxxxx
------------------------------------
Xxxxxx X. Xxxxxx
/s/ H. XXXXX XXXXX
------------------------------------
H. XXXXX XXXXX
XXXX X. XXXXXXX & XXXXX X.
XXXXXXX, as Joint Tenants
/s/ XXXX X. XXXXXXX
------------------------------------
Xxxx X. Xxxxxx
/s/ XXXXX X. XXXXXXX
------------------------------------
Xxxxx X. Xxxxxxx
95
EXHIBIT A
NOTICE OF EXERCISE OF REDEMPTION RIGHT
In accordance with Section ___ of the Second Amended and Restated
Agreement of Limited Partnership of Sunstone Hotel Investors, Limited
Partnership (the "Agreement"), the undersigned hereby irrevocably (i) presents
for redemption _______ Partnership Units in Sunstone Hotel Investors, L.P. in
accordance with the terms of the Agreement and the Redemption Right referred to
in Section 8.5 thereof, (ii) surrenders such Partnership Units and all right,
title and interest therein, and (iii) directs that the Cash Amount or REIT
Shares (as defined in the Agreement) as determined by the General Partner
deliverable upon exercise of the Redemption Right be delivered to the address
specified below, and if REIT Shares are to be delivered, such REIT shares be
registered or placed in the name(s) and at the address(es) specified below.
Dated:__________ __, _____
Name of Limited Partner:
----------------------------------------
(Signature of Limited Partner)
----------------------------------------
(Mailing Address)
----------------------------------------
(City) (State) (Zip Code)
Signature Guaranteed by:
----------------------------------------
If REIT Shares are to be issued, issue to:
Please insert social security or identifying number:
Name:
A-1
96
EXHIBIT B
SUNSTONE HOTEL INVESTORS, L.P.
CERTIFICATE OF DESIGNATION CLASSIFYING
7.9% CLASS A CUMULATIVE CONVERTIBLE PREFERRED PARTNERSHIP UNITS
This Certificate of Designation establishes the powers, rights,
preferences, qualifications, limitations and restrictions, as to distributions,
voting rights, conversion, terms and conditions of redemption, liquidation and
other terms and conditions of the 250,000 7.9% Class A Cumulative Preferred
Partnership Units (the "Series A Preferred Partnership Units") of Limited
Partnership interest of the Partnership to be issued to the Company. All
capitalized terms used but not defined herein shall have the meaning ascribed to
them in the Second Amended and Restated Agreement of Limited Partnership (the
"Agreement") of the Partnership. The Series A Preferred Partnership Units are
being issued by the Partnership to the General Partner in connection with the
issuance by the Company of 250,000 shares in the aggregate of its 7.9% Class A
Cumulative Preferred Stock (the "Series A Preferred Stock") to Xxxxxxxxx Real
Estate Investment Fund I, L.P. and Xxxxxxxxx Co-Investment Real Estate Fund I,
L.P. (collectively, "Xxxxxxxxx") in connection with the Company's acquisition
from Xxxxxxxxx of all of the capital stock of Xxxxxx Realty Corporation
("Xxxxxx"). The terms of the Units are intended to mirror those of the Series A
Preferred Stock.
1. Designation and Number. The Series A Preferred Partnership Units
shall consist of 250,000 Partnership Units which shall be issued to the Company
when the Company issues the corresponding 250,000 shares of Series A Preferred
Stock to Xxxxxxxxx. Subject to compliance with applicable protective voting
rights which may be granted to any class of Preferred Partnership Units
("Protective Provisions"), but notwithstanding any other rights of holders of
any class of Preferred Partnership Units or the powers, rights, designations,
preferences, qualifications, limitations and restrictions of any additional
class may be subordinated to, pari passu with (including, without limitation,
provisions with respect to liquidation and acquisition preferences, redemption
and/or approval of matters by vote or written consent), or senior to any of
those of any present or future class of Preferred or Common Partnership Units.
2. Distribution Provisions. Immediately prior to the Company's payment
of dividends to holders of the Series A Preferred Stock, the holder(s) of Series
A Preferred Partnership Units shall be entitled to receive for each outstanding
Series A Preferred Partnership Unit a cash distribution, prior and in preference
to any payment of any cash distribution on the Common Partnership Units, in an
amount equal to the payment to be made on each outstanding share of the Series A
Preferred Stock.
B-1
97
3. Liquidation Preference.
(a) In the event of any liquidation, dissolution or winding up of
the Partnership, either voluntary or involuntary, subject to the rights of
classes of Preferred Partnership Units that may from time to time come into
existence, the holder(s) of Series A Preferred Partnership Units shall (unless
such Partnership Units of Series A Preferred Partnership Units are converted
into Common Partnership Units pursuant to Section 5 hereof) be entitled to
receive, prior and in preference to any distribution of any of the assets of the
Partnership to the holders of Common Partnership Units by reason of their
ownership thereof, an amount per Unit equal to the amount that must be paid to
the holders of Series A Preferred Stock upon liquidation of the Company
(including any and all events constituting a liquidation under Section 3 of the
Articles Supplementary clarifying the Series A Preferred Stock) (the
"Liquidation Preference"). If the assets and funds thus distributed among the
holders of the Series A Preferred Partnership Units shall be insufficient to
permit the payment to such holder(s) of the full aforesaid amount, then, subject
to the rights of classes of Preferred Partnership Units that may from time to
time come into existence, the entire assets and funds of the Partnership legally
available for distribution shall be distributed ratably among the holders of the
Series A Preferred Partnership Units in proportion to the amount of such
Partnership Units owned by each such holder.
(b) Upon the completion of the distribution required by
subsection (a) of this Section 3 and any other distribution that may be required
with respect to classes of Preferred Partnership Units that may from time to
time come into existence, if assets remain in the Partnership, the holders of
the Common Partnership Units of the Partnership shall receive all of the
remaining assets of the Partnership.
4. Redemption.
(a) Subject to the rights of classes of Preferred Partnership
Units which may from time to time come into existence immediately prior to a
redemption of Series A Preferred Stock, the Company may redeem at its option a
number of Series A Preferred Units equal to the number of shares of Series A
Preferred Stock to be redeemed by the holder(s) thereof, and shall immediately
receive from the Partnership an amount of cash equal to the cash to be paid by
the Company to the redeeming holder(s) of shares of Series A Preferred Stock.
(b) From and after the redemption of Series A Preferred Units,
unless there shall have been a default in payment of the redemption price, all
rights of the holders of the Series A Preferred Partnership Units redeemed shall
cease with respect to such Partnership Units, and such Partnership Units shall
not thereafter be transferred on the Unitholder Ledger of the Partnership or be
deemed to be outstanding for any purpose whatsoever. Subject to the rights of
classes of Preferred Partnership Units which may from time to time come into
existence, if the funds of the Partnership legally available for redemption of
Partnership Units of Series A Preferred Partnership Units on any redemption date
are insufficient to redeem the total number of Partnership Units of Series A
Preferred Partnership Units to be redeemed on such date, those funds which are
legally available will be used to redeem the maximum possible number of such
Partnership Units ratably among the holders of such Partnership Units to be
redeemed based upon their holdings of
B-2
98
Series A Preferred Partnership Units. The Partnership Units of Series A
Preferred Partnership Units not redeemed shall remain outstanding and entitled
to all the rights and preferences provided herein. Subject to the rights of
classes of Preferred Partnership Units which may from time to time come into
existence, at any time thereafter when additional funds of the Partnership are
legally available for the redemption of Partnership Units of Series A Preferred
Partnership Units, such funds will immediately be used to redeem the balance of
the Partnership Units which the Partnership has become obliged to redeem but
which it has not redeemed.
5. Conversion. On the date on which shares of Series A Preferred Stock
are converted into Common Stock of the Company, Series A Preferred Partnership
Units shall automatically be converted into Common Partnership Units, such that
the number of Series A Preferred Partnership Units so converted shall equal the
number of shares of Series A Preferred Stock converted and the number of Common
Partnership Units received from such conversion will equal the number of shares
of Common Stock of the Company received from the conversion of the shares of
Series A Preferred Stock. Upon such conversion of Series A Preferred Stock, the
Unitholder Ledger shall be amended to reflect such conversion.
6. Voting Rights. Except as to matters upon which the General Partner is
not entitled to vote under the Agreement, the holder(s) of each Series A
Preferred Partnership Unit shall have Partner consent and approval rights equal
to such rights as would a holder of Common Partnership Units into which such
holder's Partnership Series A Preferred Partnership Units could then be
converted.
This Certificate of Designation has been approved by the General
Partner in the manner and required by law and is incorporated into the Agreement
by reference. In the event of a conflict between the provisions of this
Certificate of Designation and the provisions of the Agreement, the provisions
of this Certificate of Designation shall govern.
IN WITNESS WHEREOF, SUNSTONE HOTEL INVESTORS, L.P. has caused
this Certificate of Designation to be executed on its behalf on this 14th day of
October 1997.
SUNSTONE HOTEL INVESTORS, L.P.
By: SUNSTONE HOTEL INVESTORS, INC.,
its General Partner
By: /s/ XXXXXX X. ALTER
----------------------------
Xxxxxx X. Alter,
President
B-3
