AGREEMENT OF LIMITED PARTNERSHIP
OF
SONESTA BEACH RESORT LIMITED PARTNERSHIP
AGREEMENT OF LIMITED PARTNERSHIP
OF SONESTA BEACH RESORT LIMITED PARTNERSHIP
Agreement of Limited Partnership, dated _____________, 1998, among
FLORIDA SONESTA CORPORATION, a Florida corporation ("FSC"), as general partner,
and KEY BISCAYNE LAND CORPORATION, a Florida corporation ("Sonesta II") and KEY
BISCAYNE LIMITED PARTNERSHIP, a Florida limited partnership ("KBLP"), as limited
partners.
PRELIMINARY STATEMENT
The parties desire to form a limited partnership under the Delaware
Revised Uniform Limited Partnership Act, as amended, and upon the terms and
subject to the conditions contained herein.
NOW, THEREFORE, in consideration of the foregoing, the mutual covenants
and conditions hereinafter set forth, and other good and valuable consideration,
the parties do hereby agree as follows:
ARTICLE I
Definitions
For purposes of this Agreement, unless otherwise specifically herein
provided, the following terms shall have the respective meanings indicated
below. Any references in this Agreement to particular sections, articles,
schedules or exhibits shall, unless expressly otherwise provided or unless the
context otherwise requires, be deemed to refer to the specific sections,
articles, schedules or exhibits in this Agreement. In addition, the words
"hereof", "herein", "hereunder" and words of similar import refer to this
Agreement as a whole, and not to any particular article.
"Act" shall mean the Revised Uniform Limited Partnership Act of the
State of Delaware, as such Act has been amended or is amended from time to time
hereafter.
"Additional Units" shall have the meaning set forth in Section 3.6.
"Adjusted Capital Account Deficit" shall mean, with respect to any
Limited Partner, the deficit balance, if any, in such Limited Partner's Capital
Account as of the end of any relevant Fiscal Year, after giving effect to the
following adjustments:
(a) credit to such Capital Account any amounts which such Limited
Partners are obligated or treated as obligated to restore with respect
to any deficit balance in such Capital Account pursuant to Section
1.704-l(b)(2)(ii)(c) of the Regulations, or is deemed to be obligated to
restore with respect to any deficit balance pursuant to the penultimate
sentences of Sections 1.704-2(g)(1) and 1.704-2(i)(5) of the
Regulations; and
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(b) debit to such Capital Account the items described in Sections
1.704-l(b)(2)(ii)(d)(4), (5) and (6) of the Regulations.
The foregoing definition of Adjusted Capital Account Deficit is intended to
comply with the requirements of the alternate test for economic effect contained
in Section 1.704-l(b)(2)(ii)(d) of the Regulations and shall be interpreted
consistently therewith.
"Aetna Indebtedness" shall have the meaning set forth in the
Contribution Agreement.
"Affected Gain" shall have the meaning set forth in Section 4.5(b).
"Affiliate" shall mean, as to any Partner (or as to any other person the
affiliates of whom are relevant for purposes of any of the provisions of this
Agreement), the affiliate of such person as determined under the Securities Act
of 1933, as amended.
"Agreement" shall mean this Agreement of Limited Partnership, as it may
hereafter be amended from time to time.
"Appraiser" shall mean such qualified real estate appraiser as the
General Partner and KBLP may agree upon in writing or shall otherwise be deemed
to agree upon as provided herein. In the event the General Partner and KBLP
cannot agree upon a single appraiser within ten (10) business days following
receipt by KBLP of notice proposing an appraiser, each of the General Partner
and KBLP shall select its own appraiser within an additional ten (10) business
days, and those two appraisers shall select a third appraiser within an
additional ten (10) business days. If the two appraisers fail to select a third
appraiser within such 10 business-day period, either party may request the
American Arbitration Association, or any equivalent successor organization, to
select a third appraiser within ten (10) business days after receiving such
request, and the parties shall be bound by any such selection made within such
10 business-day period. If the American Arbitration Association, or any such
successor organization, fails to select the third appraiser within such 10-day
period, either party may apply to any court having jurisdiction to make such
selection. Any appraiser selected by the first two appraisers, by the American
Arbitration Association or such successor organization or by such court shall be
deemed the Appraiser for purposes of this Agreement.
"Bankruptcy" or "Bankrupt" shall mean, as to any person (including,
without limitation, any Partner, the Partnership or other relevant person), (i)
any proceeding brought by or against such person under the United States
Bankruptcy Code, or any successor thereto, as amended, or any state laws
providing for the relief of debtors, except that, in the case of an involuntary
proceeding brought against any such person, only if such proceeding shall not
have been withdrawn, stayed or discharged within sixty (60) days after the
institution thereof, unless, within such sixty (60) day period, such person
shall have consented to the institution thereof; (ii) admission in writing of
the inability of such person to pay its debts as they come due; (iii) the making
of an assignment for the benefit of the creditors of such person; (iv) if such
person shall become insolvent (except that, for purposes hereof, no Partner
shall be deemed insolvent merely by reason of the fact that it has a negative
balance in its Capital Account or by reason of the fact that the amount of its
liabilities exceeds the amount of its assets by an amount equal to or less
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than the negative balance of such Partner's Capital Account); or (v) the entry
of an order, judgment or decree against such person in an amount in excess of
$100,000 which continues unpaid, unstayed or undischarged for more than sixty
(60) days after the entry thereof.
"Capital Account" shall mean, with respect to any Partner, the separate
"book" account established and maintained for such Partner in accordance with
Section 704(b) of the Code and Section 1.704-l(b)(2)(iv) of the Regulations and
in accordance with such other provisions of Section 1.704-l(b) of the
Regulations that must be complied with in order for the Capital Accounts to be
determined in accordance with the provisions of said Regulations. In furtherance
of the foregoing, the Capital Accounts shall be maintained in compliance with
Section 1.704-l(b)(2)(iv) of the Regulations, and the provisions hereof shall be
interpreted and applied in a manner consistent therewith.
"Closing Date" shall have the meaning set forth in the Contribution
Agreement.
"Code" shall mean the Internal Revenue Code of 1986, as amended, or any
replacement or successor Code thereto.
"Contribution Agreement" shall mean that certain Contribution and
Formation Agreement dated the date hereof, among FSC, Sonesta II and KBLP, and
joined in by certain other parties.
"Depreciation" shall mean, if there is no difference between the fair
market value and the adjusted tax basis of property upon the contribution of
such property to the Partnership or upon the revaluation of such property
pursuant to Treas. Reg. Section 1.704-l(b)(2)(iv)(f), depreciation, depletion or
amortization, as the case may be, allowed or allowable for federal income tax
purposes ("Tax Depreciation"); otherwise, Depreciation shall mean book
depreciation, depletion or amortization as determined under Treas. Reg. Section
1.704-l(b)(2)(iv)(g) ("Book Depreciation") and the Partners' Capital Accounts
shall be adjusted in accordance with said Treasury Regulation.
"Excess Expenditures" shall mean, for each calendar year (commencing
with 1998) or portion thereof, the excess of (a) the capital expenditures
(including without limitation interest) made by the Partnership as reasonably
determined by the General Partner to be reasonably required in respect of the
Property for such calendar year or portion thereof over (b) four (4) percent of
the Gross Revenues (as defined in the Management Agreement) from the Property
for such calendar year or portion thereof (annualized for partial years).
"Existing Indebtedness" shall have the meaning set forth in the
Contribution Agreement.
"Existing Indebtedness Documents" shall have the meaning set forth in
the Contribution Agreement.
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"Fair Market Value" shall mean the price at which parties dealing at
arm's length and without any compulsion or duress to either purchase or sell the
Property would agree to purchase or sell the Property subject to the Management
Agreement (without regard to the provisions of the Third Amendment). The Fair
Market Value shall be determined by the Partnership and KBLP within twenty (20)
days after delivery of the Notice provided for in Section 2.1(b) of the
Contribution Agreement. In the event that the Partnership and KBLP cannot agree
as to the Fair Market Value, each shall designate its belief as to Fair Market
Value within ten (10) days after written notice calling for such designation is
given by either to the other, and the Appraiser shall, no later than twenty (20)
days following the expiration of such ten (10) day period, determine which of
the designated fair market values is closer to the Fair Market Value, in which
case such closer designated Fair Market Value shall be the Fair Market Value. In
the event that either the Sonesta Partners or KBLP does not designate a Fair
Market Value within such ten (10) day period, the Fair Market Value designated
by the other shall be deemed the Fair Market Value. In making such determination
of Fair Market Value, the Appraiser shall be instructed to include the Asset
Management Fee (as defined in the Contribution Agreement), and exclude from the
Partnership's expenses that portion of expenses paid or incurred by the
Partnership representing amounts paid to FSC or its Affiliates that are in
excess of the greater of (i) amounts as are contemplated under the Management
Agreement, as amended as contemplated by the Contribution Agreement, (ii)
amounts that would customarily be payable for similar services in connection
with a first-class hotel, or (iii) amounts properly paid to FSC or its
Affiliates during the time KBLP owned the Property. The costs of the Appraiser
shall be borne equally by the Sonesta Partners and KBLP. Notwithstanding the
foregoing, the Fair Market Value of the Property shall not exceed an amount
equal to ten times the average cash flow from the Property for the two calendar
years prior to the date of determination (cash flow equals revenues less
expenses and fixed expenses, including without limitation, all management fees
(including the Asset Management Fee), capital expenditures (up to four percent
of revenues per annum), insurance and real estate taxes; interest payments on
debt service shall not be an item of expense or fixed expense for purposes of
calculating the cash flow used to determine fair market value).
"FF&E" shall mean all fixtures, furniture, furnishings, fittings,
equipment, machinery, apparatus, appliances and other articles of tangible
personal property used or usable, or intended for use, in connection with any
present or future occupation or operation of all or any part of the Property,
whether located on or in the Property or stored off site, subject to such
depletions, re-supplies, substitutions and replacements as shall occur and be
made in the normal course of business.
"General Partner" shall mean FSC, its duly admitted successors or
assigns or any person who is a general partner of the Partnership at the time of
reference thereto.
"Gross Asset Value" shall mean, with respect to any asset of the
Partnership, the asset's adjusted basis for federal income tax purposes, except
as follows:
(a) the initial Gross Asset Value of any asset contributed by a
Partner to the Partnership shall be the gross fair market value of such
asset, as reasonably determined by the General Partner and the
contributing Partner;
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(b) if the General Partner reasonably determines that such
adjustment is necessary or appropriate to reflect the relative economic
interests of the Partners in the Partnership, the Gross Asset Values of
all Partnership assets shall be adjusted to equal their respective gross
fair market values, as reasonably determined by the Partners, as of the
following times: (i) the acquisition of an additional Partnership
Interest in the Partnership by any new or existing Partner in exchange
for more than a de minimis Capital Contribution; (ii) the distribution
by the Partnership to a Partner of more than a de minimis amount of
Partnership property as consideration for a Partnership Interest in the
Partnership; and (iii) the liquidation of the Partnership within the
meaning of Regulation Section 1.704-l(b)(2)(ii)(g);
(c) the Gross Asset Values of Partnership assets distributed to
any Partner shall be the gross fair market values of such assets (taking
Code Section 7701(g) into account) as reasonably determined by the
Partners as of the date of distribution; and
(d) the Gross Asset Values of Partnership assets shall be
increased (or decreased) to reflect any adjustments to the adjusted
basis of such assets pursuant to Code Section 734(b) or Code Section
743(b), but only to the extent that such adjustments are taken into
account in determining Capital Accounts pursuant to Regulation Section
1.704-l(b)(2)(iv)(m) and Section 4.3(f); provided, however, that Gross
Asset Values shall not be adjusted pursuant to this paragraph to the
extent the Partners reasonably determine that an adjustment pursuant to
Paragraph (b) above is necessary or appropriate in connection with a
transaction that would otherwise result in an adjustment pursuant to
this Paragraph.
At all times, Gross Asset Values shall be adjusted by Depreciation, which
Depreciation is taken into account with respect to the Partnership's assets for
purposes of computing Net Profits or Net Losses. Any adjustment to the Gross
Asset Values of Partnership property shall require an adjustment to the
Partners' Capital Accounts; as for the manner in which such adjustments are
allocated to the Capital Accounts, see Paragraph (d) of the definition of Net
Profits and Net Losses in the case of adjustments by Depreciation, and see
Paragraph (c) of said definition in all other cases.
"KBLP Distribution" shall mean an amount equal to the greater of (i)
$10.00 and (ii) the product of the Partnership Percentage of KBLP multiplied by
the excess of (A) the Net Realization Proceeds from a Realization Event over (B)
the Transfer Basis.
"KBLP Excess" shall mean (i) in the event of a Realization Event, an
amount equal to the Net Realization Proceeds from such Realization Event, less
the Transfer Basis, and (ii) in the event of a Special Final KBLP Distribution,
an amount equal to the Fair Market Value of the Property on the date the Notice
(as defined herein) is given, less the Transfer Basis.
"Liens" shall have the meaning set forth in Section 9.5(c).
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"Limited Partners" shall mean Sonesta II, KBLP, their duly admitted
successors and assigns or any person who is a limited partner of the Partnership
at the time of reference thereto.
"Liquidated Damages" shall have the meaning set forth in the
Contribution Agreement.
"Liquidation Committee" shall have the meaning set forth in Section
10.1.
"Management Agreement" shall have the meaning set forth in the
Contribution Agreement.
"Net Cash Flow" shall mean, with respect to any fiscal period of the
Partnership, the excess, if any, of "Receipts" over "Expenditures." For purposes
hereof, the term "Receipts" shall mean the sum of all cash receipts of the
Partnership from all sources for such period, including capital contributions
and loan and sale proceeds, and any amount of previously established Reserves
which the General Partner, in its sole and absolute discretion, determines is no
longer to be held as Reserves. The term "Expenditures" means the sum of (a) all
cash expenses (including without limitation capital expenditures) of the
Partnership for such period, (b) the amount of all payments of principal and
interest on account of any indebtedness of the Partnership, including the
Existing Indebtedness (including without limitation any prepayments thereof),
and (c) such additional cash Reserves as of the last day of such period as the
General Partner, in its sole and absolute discretion, deems necessary for any
capital or operating expenditure permitted hereunder. The Partners acknowledge
that the amount of Existing Indebtedness that must be repaid prior to any
distribution of Net Cash Flow is at least $50,000,000.
"Net Profits" or "Net Losses" shall mean the taxable income or loss of
the Partnership for Federal income tax purposes determined in accordance with
Section 703(a) of the Code as of the close of the Partnership's fiscal year (or
such other time as may be required by this Agreement), inclusive of all items of
income, gain, loss or deduction required to be separately taxed pursuant to said
Section 703(a) of the Code, with the following adjustments:
(a) any income of the Partnership that is exempt from federal
income tax and not otherwise taken into account in computing Net Profits
or Net Losses shall be added to such taxable income or loss;
(b) any expenditures of the Partnership described in Section
705(a)(2)(B) of the Code or treated as Section 705(a)(2)(B) expenditures
under Section 704(b) of the Code and not otherwise taken into account in
computing Net Profits or Net Losses shall be subtracted from such
taxable income or loss;
(c) gain or loss resulting from any disposition of Partnership
property with respect to which gain or loss is recognized for federal
income tax purposes shall be computed by reference to the Gross Asset
Value of such property rather than its adjusted tax basis;
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(d) in lieu of the depreciation, depletion, amortization and
other cost recovery deductions taken into account in computing taxable
income or loss, there shall be taken into account Depreciation; and
(e) in the event of an adjustment of the Gross Asset Value of any
Partnership asset which requires that the Capital Accounts of the
Partnership be adjusted pursuant to Treas. Reg. Sections
1.704-l(b)(2)(iv)(e), (f) and (m), the amount of such adjustments are,
in the case of Treas. Reg. Section 1.704-l(b)(2)(iv) (e) and (f), to be
taken into account as gain or loss from a taxable disposition of
Partnership property pursuant to Paragraph (c) above, and, in the case
of Treas. Reg. Section 1.704-l(b)(2)(iv)(m), to be taken into account as
additional Net Profits or Net Losses.
"Net Realization Proceeds" shall mean (i) in the event of a Realization
Event (other than one described in clause (ii) below), all cash received by the
Partnership from such Realization Event, less all expenses paid or incurred in
connection with such Realization Event, or (ii) in the event of a Realization
Event giving rise to a liquidation distribution under Section 10.2, the net
proceeds resulting from the liquidation of the Property following a dissolution
of the Partnership, less all expenses paid or incurred in connection with such
liquidation.
"Nonrecourse Deductions" shall mean, for a Partnership fiscal year, the
net increase in the amount of Partnership Minimum Gain during such Partnership
fiscal year, less the aggregate amount of any distributions (whether actual or
deemed) during such fiscal year of proceeds of Nonrecourse Liabilities (other
than Partner Nonrecourse Deductions) that are allocable to an increase in
Partnership Minimum Gain, determined in accordance with Section 1.704-2(b)(1)
and (c) of the Regulations.
"Nonrecourse Liabilities" shall have the meaning ascribed to it in
Section 1.704-2(b)(3) of the Regulations.
"Partner Nonrecourse Deductions" shall have the meaning set forth in
Section 1.704-2(i)(2) of the Regulations.
"Partners" shall mean the General Partner, the Limited Partners, and
their respective duly admitted successors or assigns, or any person who is a
Partner of the Partnership at the time of reference thereto.
"Partnership" shall mean the Delaware limited partnership formed
pursuant hereto.
"Partnership Interest" shall mean the ownership interest of a Partner in
the Partnership from time to time including the right of such Partner to any and
all benefits to which such Partner may be entitled under this Agreement,
together with the obligations of such Partner to comply with all of the terms
and provisions of this Agreement and of applicable law, and shall include,
without limitation, each Partner's Partnership Percentage and Capital Account.
Whenever in this Agreement reference is made to a particular percentage of a
Partner's Partnership Interest it shall be deemed to refer to such Partner's
Partnership Percentage.
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"Partnership Minimum Gain" shall have the meaning set forth in Section
1.704-2(b)(2) of the Regulations.
"Partnership Percentages" shall mean the percentage interests of each of
the Partners as set forth in Section 3.7, as the same may be adjusted from time
to time in accordance with the provisions of this Agreement.
"Person" or "person" shall mean any individual, trust, corporation,
partnership, limited liability company, business trust or other entity.
"Prohibited Sale" shall have the meaning set forth in Section 5.8(a).
"Property" shall mean the real property commonly known as the Sonesta
Beach Hotel, Key Biscayne, Florida and legally described on Exhibit A, together
with all improvements thereon and all personal property relating thereto and
owned by the Partnership.
"Qualified Person" shall mean a Person that is experienced in the
ownership and operation of hotels similar to the Property and that, together
with the Affiliates of such Person, has a net worth of at least $10,000,000. Any
Affiliate of Sonesta International Hotels Corporation shall be a Qualified
Person.
"Rate" shall mean the prime rate as announced from time to time by
United States Trust Company, Boston, plus one percent (1.0%).
"Realization Event" shall mean (i) a sale, exchange, or other
disposition of the Property by the Partnership for value, including an
involuntary conversion by condemnation, casualty or otherwise, on which gain or
loss is recognized by the Partners for federal income tax purposes, and (ii) an
event giving rise to a liquidation distribution under Section 10.2.
"Regulations" or "Treas. Regs." shall mean the proposed, temporary and
final regulations promulgated by the Treasury Department pursuant to the Code.
"Reserves" shall mean payments made or amounts allocated during any
period to reserves which shall be maintained in amounts deemed sufficient by the
General Partner, in its sole and absolute discretion, for working capital, to
pay taxes, insurance, debt service or to pay for repairs, replacements, capital
improvements or renewals or other costs and expenses incident to the business of
the Partnership.
"Section 704(c) Tax Items" shall have the meaning set forth in Section
4.5(c).
"Substitute Limited Partner" shall mean any assignee of a Partner's
Partnership Interest admitted as a substitute limited partner pursuant to
Article IX hereof.
"Sonesta Partners" shall mean FSC or Sonesta II and "Sonesta Partners"
shall mean both of them.
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"Special KBLP Distribution" means an amount distributable to KBLP in the
event of a Realization Event or a Special Final KBLP Distribution equal to a
portion of the KBLP Excess determined, on the date of calculation, as follows:
Percentage of Cumulative Dollar
Excess Allocable Amount of KBLP
Amount of Excess to KBLP Special Distribution
---------------- ------- --------------------
Less than $10.0 million 0% $ 0
Between $10.0 million and $10.1 million 100 up to 100,000
Between $10.1 million and $12.5 million 0 100,000
Between $12.5 million and $12.65 million 100 up to 250,000
Between $12.650 million and $15.0 million 0 250,000
Between $15.0 million and $15.25 million 100 up to 500,000
Between $15.250 million and $17.5 million 0 500,000
Between $17.5 million and $17.75 million 100 up to 750,000
Between $17.750 million and $20.0 million 0 750,000
Between $20.0 million and $20.25 million 100 up to 1,000,000
In excess of $20.25 million 0 1,000,000
In no event shall the total amount paid or payable to KBLP with respect to the
Special KBLP Distribution exceed $1,000,000.
"Special Final Distribution" shall have the meaning set forth in Section
4.9.
"Tax Items" shall have the meaning set forth in Section 4.5(a).
"Timing Requirement" shall have the meaning set forth in Section 10.2.
"Transaction Costs" shall have the meaning set forth in the Contribution
Agreement.
"Transfer Basis" shall mean, as of any date, the sum of (a) the
outstanding principal amount of all secured and unsecured indebtedness of the
Partnership on the Closing Date, including the Assumed Liabilities (as defined
in the Contribution Agreement), plus all unpaid interest accrued or deemed to
have accrued thereon through the Measurement Date (or the date of the Special
Final Distribution or applicable Realization Event, as applicable), less amounts
applied in repayment thereof in accordance with the terms of such debt (as
modified by the Second Amendment to Management Agreement in the case of the FSC
Indebtedness, as defined in the Contribution Agreement), and (b) the sum of the
Excess Expenditures for the calendar years or portion thereof through the
Measurement Date (or the date of the Special Final Distribution or applicable
Realization Event, as applicable), and the Transaction Costs, plus interest
thereon through the Measurement Date (or the date of the Special Final
Distribution or applicable Realization Event, as applicable), at the per annum
rate equal to the Rate.
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ARTICLE II
Formation of Partnership
2.1 Formation. Effective as of, but not before, the Closing Date, the
parties hereto hereby agree to and hereby form the Partnership as a limited
partnership under the Act and the terms hereof.
2.2 Name. The name of the Partnership shall be "SONESTA BEACH RESORT
LIMITED PARTNERSHIP," or such other name as the General Partner may from time to
time determine in its sole and absolute discretion.
2.3 Place of Business. The principal place of business of the
Partnership shall be located at 000 Xxxxxxxxx Xxxxxx, Xxxxxx, Xxxxxxxxxxxxx
00000, or at such other place or places as the General Partner may hereafter
determine in its sole and absolute discretion.
2.4 Purpose and Business. The purpose and business of the Partnership
shall be to own, hold, sell, exchange, transfer or otherwise dispose of (in
whole or in part), finance, manage, operate, renovate, expand, redevelop and
otherwise deal with the Property and to conduct any other business or businesses
permissible under the Act. The Partnership shall have all powers necessary or
desirable to accomplish these purposes.
2.5 Filing of Partnership Documents. Promptly upon the Closing Date, the
General Partner shall cause an executed Certificate of Limited Partnership (the
"Certificate") which is consistent with the provisions of this Agreement and in
the form required by the Act to be filed for record in the Office of the
Secretary of State of Delaware and in such additional offices as may be
designated by the Act or other applicable law. The Partners shall sign,
acknowledge and verify such applications, affidavits and other documents as may
be required by the Act or other applicable law to be signed, acknowledged or
verified in connection with the conduct of the Partnership business and shall
cause them to be filed or recorded, as required, in the appropriate governmental
offices.
2.6 Term. The Partnership shall continue in existence until the first to
occur of the following:
(a) the disposition by the Partnership of all, or substantially all, of
its assets;
(b) subject to the provisions of Section 5.8, the decision of the
General Partner, KBLP and sufficient numbers of other Limited Partners, such
that, together with KBLP, they represent a majority in interest of the
Partnership Percentages then held by the Limited Partners to dissolve the
Partnership;
(c) a dissolution required by law; or
(d) December 31, 2050.
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ARTICLE III
Capital Contributions
3.1 Initial Capital Contributions. On the Closing Date, the General
Partner and the Limited Partners shall contribute capital to the Partnership as
more particularly described in the Contribution Agreement.
3.2 Additional Capital Contributions. In the event that the General
Partner from time to time shall determine that additional funds are necessary or
desirable for any partnership purpose, in excess of other funds anticipated to
be available to the Partnership, then the General Partner may, but shall not be
obligated to, make an additional capital contribution to the Partnership either
in cash or property. Upon any such additional contribution, the Partnership
Percentages of the Partners shall be adjusted in the manner provided in Section
3.6. No Partner shall be required or permitted to make any additional capital
contribution to, or other financial accommodation for the benefit of, the
Partnership except as expressly provided herein.
3.3 Limitation of Liability. The Limited Partners shall not be bound by,
or be personally liable for, the expenses, liabilities or obligations of the
Partnership or the General Partner and the liability of the Limited Partners
shall be limited solely to the amount of their respective contributions to the
capital of the Partnership as provided in this Agreement and, to the extent
provided by applicable law, any distributions made to any Limited Partner that
are deemed to be a return or withdrawal of capital.
3.4 No Withdrawal. Except as provided herein, The Partnership shall not
be obligated to redeem or repurchase any Partnership Interest; no capital
contribution or portion thereof may be withdrawn by any Partner and no Partner
may withdraw from the Partnership except as provided herein; and no distribution
is required to be made to any Partner except in accordance with the provisions
of this Agreement. No Partner shall be entitled to demand any property from the
Partnership other than cash.
3.5 Capital Accounts. An individual Capital Account shall be maintained
for each Partner. No interest shall be paid or accrued on the Capital Account of
any Partner.
3.6 Additional Partners. Whenever the General Partner shall, in its sole
and absolute discretion, determine that additional funds are required for the
purposes contemplated herein which the General Partner is unwilling to provide
pursuant to Section 3.2, the General Partner shall have the right to issue
additional units of general or limited partnership interests (the "Additional
Units") to any person, including without limitation an Affiliate of the General
Partner. The Additional Units shall have such rights with respect to Partnership
Percentages, distributions of cash or property and allocations of Net Profits
and Net Losses, and otherwise shall have such rights, benefits and obligations
as the General Partner shall, in its sole and absolute discretion, determine.
Upon issuance of Additional Units, an appropriate amendment to this
Agreement shall be entered into among all Partners, including, without
limitation, those Partners admitted to the
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Partnership in connection with the issuance of Additional Units. Anything in
Article VII to the contrary notwithstanding, the Power of Attorney granted
pursuant to Article VII shall include the power and authority to execute,
acknowledge and deliver in the name and on behalf of the Limited Partners any
such amendment which the General Partner deems necessary or advisable in
connection with the issuance of Additional Units. Any amendments entered into in
connection with the issuance of Additional Units shall provide for a
proportionate dilution of Partnership Interests between the General Partner and
the Limited Partners based on their respective relative Partnership Percentages
immediately prior to the issuance of the Additional Units to the extent of the
Partnership Percentages applicable to the Additional Units (but the rights of
KBLP to allocations of Net Profits and Net Losses and distributions of Net Cash
Flow may not be diluted on the account of the issuance of the Additional Units).
3.7 Partnership Percentages. Subject to adjustment as herein provided,
the initial Partnership Percentages of the Partners shall be 1.00% for FSC,
98.00% for Sonesta II, and 1.00% for KBLP.
3.8 No Third Party Beneficiaries. The right of any Partner to make a
capital contribution or otherwise to do, perform, satisfy or discharge any
liability or obligation of such Partner hereunder, or to pursue any other right
or remedy hereunder or at law or in equity, shall not confer any right or claim
upon or otherwise inure to the benefit of any creditor or other third party
having dealings with the Partnership, it 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. The rights or obligations of the Partners herein set forth, including,
without limitation, the right to make additional capital contributions, shall
not be deemed an asset of the Partnership, may not be sold, transferred or
assigned by the Partnership and may not be pledged or encumbered to secure any
debt or other obligation of the Partnership or of the Partners.
ARTICLE IV
Allocation of Partnership Items; Distributions
4.1 Net Profits Allocations. After giving effect to the allocations set
forth in Sections 4.3 and 4.4, Net Profits for any fiscal year shall then be
allocated as follows:
(a) first, among the Partners to the extent necessary to reverse
any prior allocations of Losses under Section 4.2, taking into account
the Partners' respective rights to receive distributions under Section
4.7 and 4.9; and
(b) the balance, in accordance with the Partners' respective
rights to receive distributions under Sections 4.7, 4.9 or 4.10.
4.2 Net Losses Allocations. After giving effect to the allocations set
forth in Sections 4.3 and 4.4, Net Losses for any fiscal year shall be allocated
as follows:
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(a) first, among the Partners to the extent necessary to reverse
any prior allocations or Profits under Section 4.1(a), taking into
account the Partners' respective rights to receive distributions under
Section 4.7 and 4.9; and
(b) the balance, in accordance with the Partners' Percentage
Interests.
4.3 Special Allocations. Notwithstanding any other provision of this
Article IV, the following special allocations shall be made in the following
order:
(a) Minimum Gain Chargeback (Nonrecourse Liabilities). If there
is a net decrease in Partnership Minimum Gain for any Partnership fiscal
year (except as a result of the conversion or refinancing of any
Nonrecourse Liabilities, certain capital contributions, or a revaluation
of the Partnership property as further outlined in Regulation Section
1.704-2(d)(4), (f)(2), or (f)(3)), each Partner shall be specially
allocated items of Partnership income and gain for such year (and, if
necessary, subsequent years) in an amount equal to that Partner's share
of the net decrease in Partnership Minimum Gain. The items to be so
allocated shall be determined in accordance with Regulation Section
1.704-2(f). This Section 4.3(a) is intended to comply with the minimum
gain chargeback requirement in said section of the Regulations and shall
be interpreted consistently therewith. Allocations pursuant to this
paragraph shall be made in proportion to the respective amounts required
to be allocated to each Partner pursuant hereto.
(b) Minimum Gain Attributable to Partner Nonrecourse Debt. If
there is a net decrease in Minimum Gain Attributable to Partner
Nonrecourse Debt during any fiscal year (other than due to the
conversion, refinancing or other change in the debt instrument causing
it to become partially or wholly non-recourse, certain capital
contributions, or certain revaluations of Partnership property as
further outlined in Regulation Section 1.704-2(i)(4)), each Partner
shall be specially allocated items of Partnership income and gain for
such year (and, if necessary, subsequent years) in an amount equal to
that Partner's share of the net decrease in the Minimum Gain
Attributable to Partner Nonrecourse Debt. The items to be so allocated
shall be determined in accordance with Regulation Section 1.704-2(i)(4)
and (j)(2). This Section 4.3(b) is intended to comply with the minimum
gain chargeback requirement with respect to Partner Nonrecourse Debt
contained in said section of the Regulations and shall be interpreted
consistently therewith. Allocations pursuant to this paragraph shall be
made in proportion to the respective amounts required to be allocated to
each Partner pursuant hereto.
(c) Qualified Income Offset. In the event that any Limited
Partner unexpectedly receives any adjustments, allocations or
distributions described in Regulation Section 1.704-l(b)(2)(ii)(d)(4),
(5), or (6), and such Limited Partner has an Adjusted Capital Account
Deficit, items of Partnership income and gain shall be specially
allocated to such Partner in an amount and manner sufficient to
14
eliminate the Adjusted Capital Account Deficit as quickly as possible.
This Section 4.3(c) is intended to constitute a "qualified income
offset" under Regulation Section 1.704-l(b)(2)(ii)(d) and shall be
interpreted consistently therewith.
(d) Nonrecourse Deductions. Nonrecourse Deductions for any fiscal
year or other applicable period shall be specially allocated to the
Partners in accordance with their Partnership Percentages.
(e) Partner Nonrecourse Deductions. Partner Nonrecourse
Deductions for any fiscal year or other applicable period shall be
specially allocated to the Partner that bears the economic risk of loss
for the debt (i.e., the partner nonrecourse debt) in respect of which
such Partner Nonrecourse Deductions are attributable (as determined
under Regulation Section 1.704-2(b)(4) and (i)(1).
(f) Section 754 Basis Adjustments. To the extent an adjustment to
the adjusted tax basis of any Partnership asset pursuant to Sections
732, 734 or 743 of the Code is required, pursuant to Regulation Section
1.704-l(b)(2)(iv)(m), to be taken into account in determining Capital
Accounts, the amount of such adjustment to the Capital Accounts shall be
treated as an item of gain (if the adjustment increases the basis of the
asset) or loss (if the adjustment decreases such basis) and such gain or
loss shall be specially allocated to the Partners in a manner consistent
with the manner in which their Capital Accounts are required to be
adjusted pursuant to said section of the Regulations.
(g) Allocation of Excess Nonrecourse Liabilities. Any "excess
nonrecourse liabilities" (as defined within Regulations Section
1.752-3(a)) shall be allocated in the same manner as Nonrecourse
Deductions are allocated to the Partners in accordance with their
Partnership Percentages.
4.4 Curative Allocations. Notwithstanding any other provision of this
Article IV to the contrary, the allocations set forth in Sections 4.3(a),
4.3(b), 4.3(c), 4.3(d), 4.3(e) and 4.3(f) hereof (the "Regulatory Allocations")
shall, to the extent necessary and possible, be offset with other Regulatory
Allocations or with special allocations of other items of Partnership income,
gain, loss, and deduction so that the cumulative net amount of allocations of
Partnership items under this Article IV shall be equal to the net amount that
would have been allocated to each Partner if the Regulatory Allocations had not
occurred. This Section 4.4 is intended to minimize to the extent possible and to
the extent necessary any economic distortions which may result from application
of Section 1.704-l(b) of the Regulations and shall be interpreted in a manner
consistent therewith.
4.5 Tax Allocations.
(a) Generally. Subject to paragraphs (b) and (c) of this Section
4.5, items of income, gain, loss, deduction and credit to be allocated
for income tax
15
purposes (collectively, "Tax Items") shall be allocated among the
Partners on the same basis as the respective book items.
(b) Sections 1245/1250 Recapture. If any portion of gain from the
sale of property is treated as gain which is ordinary income by virtue
of the application of Code Sections 1245 or 1250 ("Affected Gain"), then
(A) such Affected Gain shall be allocated among the Partners in the same
proportion that the depreciation and amortization deductions giving rise
to the Affected Gain were allocated and (B) other Tax Items of gain of
the same character that would have been recognized, but for the
application of Code Sections 1245 and/or 1250, shall be allocated away
from those Partners who are allocated Affected Gain pursuant to Clause
(A) so that, to the extent possible, the other Partners are allocated
the same amount, and type, of capital gain that would have been
allocated to them had Code Sections 1245 and/or 1250 not applied. For
purposes hereof, in order to determine the proportionate allocations of
depreciation and amortization deductions for each fiscal year or other
applicable period, such deductions shall be deemed allocated on the same
basis as Net Profits and Net Losses for such respective period.
(c) Allocations Respecting Section 704(c) and Revaluations.
Notwithstanding paragraph (b) hereof, Tax Items with respect to
Partnership property that is subject to Code Section 704(c) and/or
Regulation Section 1.704-3 (collectively "Section 704(c) Tax Items")
shall, to the extent so required, be allocated in accordance with said
Code section and Regulation Section 1.704-3(b)(1).
4.6 Allocations Subsequent to Assignment or Admission of Additional
Partners. To the extent permitted by the Code, Net Profits or Net Losses and
other items attributable to a Partnership Interest acquired by reason of an
assignment from a Partner shall be allocated or adjusted between the assignor
and the assignee based upon either (a) the length of time in any fiscal period
of the Partnership during which the assigned Partnership Interest was owned by
each of them, determined with reference to the effective date of the assignment,
or (b) an interim closing of the Partnership's books (at assignor's sole
expense), such manner of allocation or adjustment to be determined by the
General Partner in its sole and absolute discretion.
4.7 Distributions.
(a) The Partnership shall make distributions of Net Cash Flow: (i)
resulting from any source (other than in connection with a Realization Event) to
the Partners (other than KBLP if the Partnership has previously made the Special
Final Distribution to KBLP) at such time and in such amounts as are determined
in the sole and absolute discretion of the General Partner; any such
distributions shall be made to the Partners (other than KBLP if the Partnership
has previously made the Special Final Distribution to KBLP) in accordance with
their respective Partnership Percentages; and (ii) resulting from a Realization
Event to the Partners (other than KBLP if the Partnership has previously made
the Special Final Distribution to KBLP), except
16
that to the extent KBLP is entitled to a distribution resulting from a
Realization Event, the amount of such distribution shall be determined as set
forth in subparagraph (b) below, at such time and in such amounts as are
determined in the sole and absolute discretion of the General Partner; any such
distributions shall be made to the Partners (other than KBLP if the Partnership
has previously made the Special Final Distribution to KBLP) in accordance with
their respective Partnership Percentages.
(b) Unless the Partnership has made the Special Final Distribution to
KBLP, within thirty (30) days after a Realization Event, the Partnership shall
make the KBLP Distribution to KBLP. Upon payment of the KBLP Distribution, KBLP
shall be deemed to have (i) relinquished its interest in the Partnership, and
all rights and privileges pertaining thereto or hereunder, including any right
to vote on Partnership matters or to receive any further distributions from the
Partnership whatsoever (except as provided in Section 10.2(e)), including the
Special Final Distribution, and (ii) assigned to FSC all of its right, title and
interest in, to and under this Agreement.
4.8 Allocation of Nonrecourse Liabilities. Subject to the provisions of
Section 5.8, Nonrecourse Liabilities shall be allocated to the Partners in
accordance with their respective Partnership Percentages; provided that
notwithstanding the foregoing or Section 5.8 to the contrary, prior to the KBLP
Distribution or the Special Final Distribution, the Aetna Indebtedness (and any
nonrecourse indebtedness that replaces or refinances the Aetna Indebtedness)
shall be allocated 100 percent to KBLP, and after the KBLP Distribution or the
Special Final Distribution, such indebtedness shall be allocated to the Partners
in accordance with their respective Partnership Percentages.
4.9 Special Final Distribution to KBLP. The Partnership may elect (in
its sole discretion) at any time on or after January 1, 2002 by written notice
(the "Notice") delivered to KBLP or its successors or legal representatives, to
make a special final distribution (the "Special Final Distribution") to KBLP
equal to the greater of (i) $10.00 and (ii) the product of the Partnership
Percentage of KBLP multiplied by the excess of (A) the Fair Market Value of the
Property on the date the Notice is delivered over (B) the Transfer Basis. The
Special Final Distribution shall be made on the twentieth (20th) day following
the date of the Notice and shall be paid in cash (and, in the event that the
Fair Market Value has not been determined, the Partnership shall pay to KBLP the
amount to be paid pursuant to this Section based on the amount designated by the
Sonesta Partners as the Fair Market Value pursuant to the definition of "Fair
Market Value," and a subsequent adjustment shall be made between the Partnership
and KBLP upon the determination of Fair Market Value if the amount owing based
on the final determination of Fair Market Value differs from the sum originally
paid ). Upon payment of the Special Final Distribution, KBLP shall be deemed to
have (i) relinquished its interest in the Partnership, and all rights and
privileges pertaining thereto or hereunder, including any right to vote on
Partnership matters or to receive any further distributions from the Partnership
whatsoever (except as provided in Section 10.2(e)), and (ii) assigned to FSC all
of its right, title and interest in, to and under this Agreement.
17
On the Closing Date, KBLP shall execute and deposit in an escrow (the
terms of which are reasonably acceptable to FSC and KBLP) established with the
law firm Broad & Xxxxxx in Boca Raton, Florida, or such other escrow agent
reasonably acceptable to FSC and KBLP, an assignment of its interest in the
Partnership to FSC. The terms of the escrow shall provide for the release of the
assignment to FSC upon the escrowee's receipt of evidence that the Special Final
Distribution or the KBLP Distribution has been paid to KBLP. Notwithstanding the
foregoing, the failure of such assignment to be so deposited into, or released
from, the escrow shall not vitiate the effectiveness of KBLP's relinquishment of
its interest in the Partnership, and all rights and privileges pertaining
thereto or hereunder, as further described above in this Section or Section
4.7(b), upon the payment of the Special Final Distribution or the KBLP
Distribution to KBLP.
4.10 Special KBLP Distribution. Notwithstanding anything contained in
this Agreement to the contrary, and in addition to the other distributions to
which KBLP is entitled, in the event of a Realization Event or a Special Final
KBLP Distribution, the Partnership shall make the Special KBLP Distribution to
KBLP. The Partnership shall pay to KBLP the Special KBLP Distribution in the
form of an unsecured non-interest bearing promissory note payable in five equal
annual installments beginning one year after the Realization Event or the
Special Final KBLP Distribution, as applicable (provided that the Partnership
may, in its sole discretion, prepay all or any portion of the note).
4.11 Liquidated Damages. If prior to January 1, 2002, the Partnership
sells, exchanges or otherwise disposes of the Property, or the Partnership is
otherwise liquidated or dissolved in a manner that results in income or gain for
federal income tax purposes by KBLP or is treated as a sale or exchange of all
or substantially all of the Property for federal income tax purposes, or there
is any other occurrence (other than a refinancing of the Aetna Indebtedness or
its replacement or the consummation of the Transactions, as defined in the
Contribution Agreement) that results in income or gain for federal income tax
purposes by KBLP or is treated as a sale or exchange of all or substantially all
of the Property for federal income tax purposes, then the Partnership shall,
concurrent with the occurrence of any such event, pay to KBLP an amount equal to
the Liquidated Damages.
ARTICLE V
Management of the Partnership
5.1 Management. Subject to the provisions of Section 5.8, the General
Partner shall have exclusive authority to manage and control the Partnership
business. Except as otherwise expressly provided herein, the General Partner
shall have the right, authority and power to do any and all acts and things
necessary, proper, convenient or advisable in its sole and absolute discretion
to accomplish the purposes of the Partnership and manage the business and assets
of the Partnership, without the consent or approval of any Limited Partner,
including without limitation the following:
(a) To expend Partnership funds (whether derived from capital or income
or loans) in the exercise of any rights or powers possessed by the General
Partner under this Agreement;
18
(b) To own, acquire, hold, develop, lease, manage, operate, encumber,
exchange, convert, sell or otherwise dispose of the Partnership property in
whole or in part (including the creation of joint venture or tenancy-in-common
interests), or to authorize the sale, exchange or other disposition of the
Partnership property in whole or in part (including the creation of joint
venture or tenancy-in-common interests), or any interest therein, whether or not
such sale results in the dissolution of the Partnership or makes it impossible
to carry on its ordinary business, at such prices or amounts for cash or
securities (including without limitation promissory notes, whether secured or
unsecured) and upon such other terms, as the General Partner deems in its sole
and absolute discretion to be in the best interests of the Partnership;
(c) To invest and reinvest Partnership funds or pool Partnership funds
for the purpose of investing;
(d) To borrow money which the General Partner deems necessary or
advisable, in its sole and absolute discretion, in connection with the business
and affairs of the Partnership, including borrowings from the General Partner,
its Affiliates or others, to be evidenced by notes or debentures and to secure
the repayment of such borrowing by executing mortgages or deeds of trust,
assignments, or security agreements pledging or otherwise encumbering or
subjecting to security interests all or any part of the property of the
Partnership, and to refund, refinance, increase, modify, consolidate or extend
the maturity and/or other terms of any indebtedness created by such borrowing,
or any such mortgage, deed of trust, assignment, security agreement, pledge,
encumbrance or other security device;
(e) To enter into such agreements, contracts, documents and instruments
with such parties and to give such receipts, releases and discharges with
respect to all of the foregoing and any matters incident thereto as the General
Partner, in its sole and absolute discretion, may deem advisable, appropriate or
convenient in connection with the business of the Partnership;
(f) To place record title to, or the right to use, Partnership assets in
the name or names of a nominee or nominees for any purpose convenient or
beneficial to the Partnership;
(g) To employ from time to time persons or companies (which may be
Affiliates) in connection with the operation and management of the Partnership
business or assets including, but not limited to, developers, supervisory and
managing agents, consultants, building management agents, insurance brokers,
sales agents, real estate brokers, loan brokers, independent contractors,
attorneys and accountants, on such terms and for such compensation as the
General Partner shall determine in its sole and absolute discretion;
(h) To manage the Partnership property or to contract, either totally or
partially, for management services by another person or company (which may be an
Affiliate).
(i) To pay, collect, compromise, litigate, arbitrate or otherwise adjust
any and all claims or demands of or against the Partnership;
19
(j) To establish, maintain and draw upon checking, savings and other
accounts in the name of the Partnership in such bank or banks as the General
Partner may from time to time select in its sole and absolute discretion and to
designate others to draw upon such accounts;
(k) To execute, acknowledge or verify and file any notification,
application, statement and other filing in the name of or on behalf of the
Partnership that the General Partner, in its sole and absolute discretion,
consider to be required or desirable to be filed with any local, state or
federal agency, department or authority;
(l) To admit additional Partners from time to time and determine the
rights and interests of such Partners (subject, however, to the provisions of
Section 3.6);
(m) To permit the withdrawal and/or substitution or succession of
Partners (which may be Affiliates);
(n) To develop, redevelop or improve the Partnership property and to
determine the nature and scope, design and/or expenditures therefor and to
determine if and when to proceed with any phase of development or redevelopment
and to enter into agreements or contracts with respect thereto with Affiliates
or others;
(o) To select or vary depreciation or accounting methods, change the
Partnership fiscal year or make other material decisions regarding the treatment
of transactions for bookkeeping or tax purposes;
(p) With the written approval of all Partners, to file a petition for
Bankruptcy or other similar reorganization under applicable statutes;
(q) With the written approval of all Partners, to assign Partnership
property in trust for creditors or on the assignee's promise to pay the debts of
the Partnership;
(r) To confess a judgment or submit a Partnership claim or liability to
arbitration;
(s) To acquire assets and property for and on behalf of the Partnership,
including the acquisition of property for the purpose of reinvesting
condemnation proceeds in accordance with Section 1033 of the Code;
(t) To delegate any authority granted hereunder;
(u) To exercise and enforce the rights of the Partnership under any
agreement, including without limitation the rights of the Partnership to
terminate any agreement;
(v) To take all actions and execute all documents and instruments
necessary or advisable in the sole and absolute discretion of the General
Partner to implement and further the purposes and operate the business of the
Partnership in accordance with the terms hereof; and
(w) To do any and all of the foregoing for such consideration and upon
such other terms and conditions as the General Partner in its sole and absolute
discretion determines to be
20
appropriate, and in no event shall any purchaser, lender, title company or other
third party be required to ascertain whether any action of the General Partner
has in fact been duly authorized, and the failure of the General Partner to
obtain such authorization shall in no way affect the validity of any sale,
conveyance, mortgage, deed of trust, lease, loan extension or renewal made by
the General Partner.
5.2 Independent Activities; Other Businesses. Each party recognizes that
the Partners (including without limitation the General Partner), and their
Affiliates, have or may have other business interests, activities and
investments, some of which may now or hereafter be in conflict or competition
with the business of the Partnership, and that each Partner (including without
limitation the General Partner) and its respective Affiliates are entitled to
carry on such other business activities, interests and investments without any
accountability therefor to the Partnership or any other Partner. Each Partner
(including without limitation the General Partner), and each Affiliate of each
Partner (including without limitation the General Partner), may engage in or
possess an interest in any other business or venture of any kind, independently
or with others, including, without being limited to, owning, financing,
acquiring, leasing, promoting, developing, improving, constructing, operating or
managing other real or personal properties on its own behalf or on behalf of
other entities with which it is affiliated or associated, and any Partner
(including without limitation the General Partner) and each Affiliate of any
Partner (including without limitation the General Partner) may engage in any
activities, whether or not competitive to the Partnership, including without
limitation the management of the Property by an Affiliate of the General
Partner, without any obligation to offer any interest in such activities to the
Partnership or to any Partner or to any Affiliate of any Partner. Neither the
Partnership nor any Partner nor any Affiliate of any Partner shall have any
right by virtue of this Agreement or by virtue of the relationship between the
Partners as partners, in or to such other activities, or to the income or
profits derived therefrom, and the pursuit of such activities, even if
competitive with the business of the Partnership, shall not be deemed wrongful
or improper or a breach of any joint venture or fiduciary duties owed by one
party to the other, or entitle either party to any interest in or sharing in the
profits or losses from any such other activities.
5.3 Duties; Reimbursement. The General Partner shall provide services to
the Partnership as it shall deem to be appropriate in its sole and absolute
discretion in connection with the day-to-day operations of the Partnership and
shall be entitled to such compensation (in addition to the compensation payable
under the Management Agreement) as the General Partner determines in good faith
is reasonable based on the nature and scope of services provided by it to the
Partnership from time to time and consistent with compensation paid in the
marketplace to independent third parties for similar services rendered with
respect to comparable properties; provided that any compensation payable to the
General Partner (or its Affiliates) in addition to that payable under the
Management Agreement shall be subordinate to amounts due with respect to the
KBHA/PLT Indebtedness (as defined in the Contribution Agreement). In addition,
the Partnership shall pay or reimburse the General Partner for all reasonable
out-of-pocket expenses incurred by it in connection with the Partnership's
business, which reimbursement may include a reasonable allocation of overhead or
general administrative expenses. The General Partner shall devote itself to the
business of the Partnership to the extent it, in its sole and absolute judgment,
deems necessary for the efficient carrying on thereof. The General Partner shall
have no
21
obligation to conduct the business of the Partnership so as to accommodate the
personal or business circumstances of the Limited Partners.
5.4 Additional Compensation to the General Partner;
Transactions with Affiliates.
(a) The General Partner and/or its Affiliates shall be entitled to
receive, in addition to the amounts described in Section 5.3 and elsewhere
herein and the amounts provided in the Management Agreement, fees and other
compensation for services rendered or goods provided from time to time to or on
behalf of the Partnership as would be payable to third parties providing
comparable goods or services to the Partnership.
(b) No contract or agreement entered into between the Partnership and
the General Partner or any Affiliate of the General Partner shall be void,
violable or in violation of any rights, duties, liabilities or responsibilities
of the General Partner, whether or not approved by the Limited Partners, so long
as any such transaction shall be in compliance with the provisions of this
Agreement.
(c) The General Partner shall be permitted to engage attorneys,
accountants and other advisors and professionals which may have current or prior
relationships with the General Partner or its Affiliates. No such relationship,
even if continuing and ongoing, shall be deemed a conflict of interest by any
such professionals.
5.5 Limitation of liability. Neither the General Partner nor any
officer, shareholder, director, employee, agent or Affiliate of the General
Partner shall be liable, responsible or accountable in damages or otherwise to
the Partnership or any Limited Partner for any action taken or failure to act on
behalf of the Partnership within the scope of the authority conferred on the
General Partner by this Agreement or by law unless such action or omission
constituted gross negligence or willful misconduct.
5.6 Indemnification. The Partnership shall indemnify and hold harmless
the General Partner and each of its officers, directors, shareholders,
employees, agents and Affiliates, and their respective successors and assigns
(collectively the "Indemnified Parties") from and against any loss, expense,
damage or injury suffered or sustained by any such person by reason of any acts,
omissions or alleged acts or omissions arising out of their activities on behalf
of the Partnership or in furtherance of the interests of the Partnership
including, but not limited to, any judgment, award, settlement, reasonable
attorney's fees and other costs or expenses incurred in connection with the
defense of any actual or threatened action, proceeding or claim (which
attorney's fees and defense costs shall be paid as incurred upon receipt of an
undertaking by the Indemnified Party to repay the same if the Indemnified Party
is found not to be entitled thereto), provided that the acts, omissions or
alleged acts or omissions upon which such actual or threatened action,
proceeding or claim is based are not found in a non-appealable order by a court
of competent jurisdiction to have been performed or omitted in bad faith or as a
result of gross negligence by or the willful misconduct of such Indemnified
Party.
22
5.7 Authority to Bind Partnership. Except as otherwise provided herein
or in the Act, the General Partner shall have authority to act on behalf of the
Partnership and to bind it under this Agreement and in no event shall any third
party be required to ascertain whether any action of the General Partner has in
fact been duly authorized by the Limited Partners. The Limited Partners shall
take no part in the management and operation of the business of the Partnership
and shall have no authority to act on behalf of or bind the Partnership.
5.8 Restrictions on General Partner Authority; Etc. Notwithstanding
anything to the contrary contained herein but subject to Section 4.9 hereof, the
following restrictions shall apply as long as any Partnership Interest in the
Partnership is owned by KBLP:
(a) Without the prior written consent of KBLP, the Partnership shall not
voluntarily dispose of all or substantially all of the Property prior to January
1, 2002. The provisions of Section 5.8(a) shall not apply to (i) transactions,
such as like-kind exchanges, which would not result in the recognition of income
or gain to KBLP for federal income tax purposes by reason of the application of
Section 704(c) or Section 737 of the Code (but, in the event of any disposition
permitted by the preceding clause, the disposition of any carryover basis real
property or other successor real property shall be subject to the provisions of
this Section 5.8), (ii) the mortgage of or the granting of security interests in
any and all property of the Partnership provided the same is not a sale or
exchange for federal income tax purposes of all or substantially all of the
Property (and the conveyance of such property in connection with foreclosure of
any such mortgage or security interest or by deed in lieu thereof), (iii) the
lease of the Property or portions thereof provided the same is not a sale or
exchange for federal income tax purposes of all or substantially all of the
Property, (iv) the exercise of all other rights of an owner with respect to the
Property provided the same is not a sale or exchange for federal income tax
purposes of all or substantially all of the Property, and (v) the sale, exchange
or other disposition of the Property so long as the Partnership shall,
concurrent with the occurrence of such an event, pay to KBLP an amount equal to
the Liquidated Damages. If the Partnership shall have obtained an opinion of
counsel (reasonably acceptable to KBLP) with respect to the determination as to
whether a particular transaction will result in income or gain for federal
income tax purposes by KBLP or is treated as a sale or exchange of all or
substantially all of the Property for federal income tax purposes(although the
Partnership shall not be required to do so), the determination set forth in such
opinion shall be deemed conclusive for purposes of this Agreement. Any
transaction prohibited pursuant to the provisions of this Section 5.8(a) is
hereinafter referred to as a "Prohibited Sale".
(b) In no event shall the Property be used other than as a resort or
hotel prior to January 1, 2002 without the written consent of KBLP. Subject to
the provisions of Section 5.8(a), no sale, exchange, lease or other disposition
relating to the Property or any portion of it shall be entered into between the
General Partner and any Affiliate of the General Partner if the same would
adversely affect the value of KBLP's Partnership Interest.
(c) Nonrecourse Liabilities shall be allocated to KBLP to the maximum
extent permissible under Treasury Regulation ss. 1.752-3 and Revenue Ruling
95-41, 1995-23 I.R.B.5., and the Partnership shall at all times have nonrecourse
indebtedness (as described in Treasury
23
Regulation ss. 1.752-l(a)(2)) so that KBLP is allocated indebtedness equal at
least to the aggregate negative Capital Account of KBLP from time to time, but
in no event less than the negative Capital Account of KBLP at the time of the
contribution of the Property to the Partnership.
(d) Prior to the Special Final Distribution to KBLP and the payment of
the KBHA/PLT Note (as defined in the Contribution Agreement), the Partnership
shall not incur secured debt that, in the aggregate, exceeds eighty percent
(80%) of the fair market value of the Property from time to time, excluding debt
to the Sonesta Partners or any of their Affiliates.
ARTICLE VI
Financial Matters
6.1 Books and Accounts. The General Partner shall, at the expense of the
Partnership, keep or cause to be kept adequate books of account of the
Partnership, which shall record and reflect all of the contributions to the
capital of the Partnership and all of the income, expenses and transactions of
the Partnership or at the Property. Such books of account shall be kept at the
principal place of business of the Partnership. The General Partner shall
determine the method of accounting utilized by the Partnership. The Limited
Partners shall have the right, upon reasonable notice to the General Partner and
during normal business hours, to examine and make copies of the books and
records of the Partnership to the extent provided by the Act at the location at
which such books and records are ordinarily kept, such examination and copying
to be made at the expense of the Limited Partners.
6.2 Accounting and Reports. At least once a year, the General Partner
shall, at the expense of the Partnership, cause to be prepared and transmitted
to each Partner a balance sheet and profit and loss statement of the Partnership
relating to the prior fiscal year, which statements may be audited or unaudited
in the sole and absolute discretion of the General Partner.
6.3 Fiscal Year. The Partnership's fiscal year shall be the year, or
portion thereof in the event of a partial year, ending December 31.
6.4 Banking. All funds of the Partnership shall be deposited in a
separate bank account or accounts as shall be determined by the General Partner.
All withdrawals therefrom shall be made upon checks signed by the General
Partner or by any person authorized to do so by the General Partner, or by wire
transfer or cashier's checks effected by the General Partner or persons
authorized to do so by the General Partner.
6.5 Tax Returns. The General Partner shall cause to be prepared at the
Partnership's expense the required Federal, state and local tax returns. As soon
as practicable after the close of each fiscal year of the Partnership, the
General Partner shall furnish a copy of Internal Revenue Service Form K-1 for
such fiscal year to each Partner.
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6.6 Tax Elections. The General Partner shall be authorized to make on
behalf of the Partnership any and all elections under the Code which are
permitted to be made by the Partnership, including without limitation an
election pursuant to Section 754 of the Code, but nothing herein shall be deemed
to obligate the General Partner to make any such election.
6.7 Tax Audits. The Partnership, through the General Partner, is
authorized to cooperate with and to monitor the Internal Revenue Service in any
audit that the Internal Revenue Service may conduct of the Partnership books and
records and information or other returns filed by the Partnership for Federal
income tax purposes. The Partnership, through the General Partner, may similarly
cooperate with and monitor any audit by any state tax or other state or local
governmental authority. The Partnership may prepare and file protests or other
appropriate responses to such audits. All costs incurred in connection with the
foregoing activities, including legal and accounting costs, shall be Partnership
expenses. Neither the Partnership nor the General Partner shall be obligated to
defend any Partner against any claim asserted by the Internal Revenue Service or
state or local tax authority of additional tax liability arising out of the
ownership of its Partnership Interest.
6.8 Designation of Tax Matters Partner. The General Partner is hereby
authorized to designate the Tax Matters Partner of the Partnership (which could
be the General Partner) as provided in regulations pursuant to Section 6231 of
the Code. Each Partner by the execution of this Agreement consents to such
designation of the Tax Matters Partner and agrees to execute, certify,
acknowledge, deliver, swear to, file and record at the appropriate public
offices such documents as may be necessary or appropriate to evidence such
consent.
6.9 Duties of Tax Matters Partner.
(a) To the extent and in the manner provided by applicable law and
regulations, the Tax Matters Partner shall furnish the name, address, profits,
interest and taxpayer identification number of each Partner, including any
Substitute Limited Partner, to the Secretary of the Treasury or his delegate
(the "Secretary").
(b) To the extent and in the manner provided by applicable law and
regulations, the Tax Matters Partner shall keep each Partner informed of the
administrative and judicial proceedings for the adjustment at the Partnership
level of any item required to be taken into account by a Partner for income tax
purposes (such administrative proceedings referred to hereinafter as a "tax
audit" and such judicial proceeding referred to hereinafter as "judicial
review").
(c) If the Tax Matters Partner, on behalf of the Partnership, receives a
notice with respect to a Partnership tax audit, the Tax Matters Partner shall
forward a copy of such notice to the Partners who hold or held an interest in
the profits or losses of the Partnership for the taxable year to which the
notice relates.
6.10 Authority of Tax Matters Partner. The Tax Matters Partner is hereby
authorized, but not required:
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(a) To enter into any settlement with the Internal Revenue Service or
the Secretary with respect to any tax audit or judicial review in which
agreement the Tax Matters Partner may expressly state that such agreement shall
bind the other Partners except that such settlement agreement shall not bind any
Partner who (within the time prescribed pursuant to the Code) files a statement
with the Secretary that the Tax Matters Partner shall not have the authority to
enter into a settlement agreement on the behalf of such Partner;
(b) In the event that a notice of a final administrative adjustment of
any item required to be taken into account by a Partner for tax purposes (a
"final adjustment") is mailed to the Tax Matters Partner, to seek judicial
review of such final adjustment including, but not limited to, the filing of a
petition for readjustment with the Tax Court, the District Court of the United
States for the district in which the Partnership's principal place of business
is located or the United States Court of Claims;
(c) To intervene in any action brought by another Partner for judicial
review of a final adjustment;
(d) To file a request for an administrative adjustment with the
Secretary at any time and, if any part of such request is not allowed by the
Secretary, to file a petition for judicial review with respect to such request;
(e) To enter into an agreement with the Internal Revenue Service to
extend the period for assessing any tax which is attributable to any item
required to be taken into account by a Partner for tax purposes or an item
affected by such item; and
(f) To take any other action on behalf of the Partners or the
Partnership in connection with any tax audit or judicial review to the extent
permitted by applicable law or regulations.
6.11 Expenses of Tax Matters Partner; Conflicts of Interest. The
Partnership shall indemnify and reimburse the Tax Matters Partner for all
claims, liabilities, losses, expenses and damages (including but not limited to
legal and accounting fees) incurred in connection with any administrative or
judicial proceeding with respect to the Partnership or the tax liability of the
Partners relating thereto. Neither the General Partner, nor any Affiliate, nor
any other person, shall have any obligation to provide funds for such purpose.
The taking of any action and the incurring of any expense by the Tax Matters
Partner in connection with any such proceeding, except to the extent required by
law, is a matter in the sole discretion of the Tax Matters Partner and the
provisions on limitation of liability and indemnification set forth in Sections
5.5 and 5.6 shall be fully applicable to the Tax Matters Partner with respect to
any actions taken or required to be taken by it in its capacity as such. It is
further acknowledged that the interests of the Limited Partners may from time to
time be inconsistent with the interests of other Partners, including the Tax
Matters Partner, and nothing herein shall be deemed to create any obligation on
the part of the Tax Matters Partner to take into account any such inconsistent
or conflicting interests except as expressly provided herein.
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ARTICLE VII
Power of Attorney
7.1 Grant of Power. Each Limited Partner (including any Substitute
Limited Partner) hereby designates and appoints the General Partner and, with
respect to any corporate General Partner (or the corporate general partner or
manager of any General Partner), the President (or the chief executive officer,
however designated), Vice President and the Secretary thereof, and each of them,
as his or its attorney-in-fact with power of substitution to act in his or its
name and on his or its behalf in the execution, acknowledgment and filing of
documents as follows:
(a) Certificates of Limited Partnership, as well as amendments thereto,
under the laws of the State of Delaware and the laws of any other states in
which such a certificate is required to be filed;
(b) Any other instrument that may be required to be filed, or that the
General Partner deems advisable to file, by the Partnership under applicable
law;
(c) Any documents that may be required to effect the reorganization and
continuation of the Partnership, the amendment of this Agreement, the admission
of any additional or Substitute Limited Partner or the dissolution and
termination of the Partnership, provided such reorganization, continuation,
amendment, admission or dissolution and termination is in accordance with the
terms of this Agreement; and
(d) Any and all such other documents and instruments as may be deemed
necessary or desirable by the General Partner to carry out fully the provisions
of this Agreement in accordance with its terms and any amendments or
modifications thereof and any certificates, instruments or other documents
relating thereto.
7.2 Nature of Power. The power of attorney granted by each Limited
Partner in Section 7.1:
(a) Is a special power of attorney coupled with an interest and is
irrevocable and shall survive the disability, dissolution, liquidation or
cessation of the existence as a legal entity of a Limited Partner;
(b) May be exercised by the General Partner, or appropriate officer
thereof or of the general partner or manager thereof, for each Limited Partner
by a facsimile signature of such person or by listing each Limited Partner
executing any instrument with a facsimile signature of such person acting as
attorney-in-fact for all of them; and
(c) Shall survive the delivery of any assignment by a Limited Partner of
the whole or any portion of his or its Partnership Interest in the Partnership
except that where the assignee thereof has been approved by the General Partner
for admission to the Partnership as a Substitute Limited Partner the power of
attorney shall survive the delivery of such assignment for the sole
27
purpose of enabling the General Partner to execute, acknowledge and file any
instrument necessary to effect such substitution.
7.3 Effect of this Article. This Article VII does not supersede any
other section of this Agreement, nor is it to be used to deprive any Limited
Partner of its rights under this Agreement, but is intended only to provide a
simplified system for the execution of documents.
ARTICLE VIII
Transfer of General Partnership Interest
8.1 Withdrawal of General Partner.
(a) Subject to the provisions of Sections 4.11, 5.8 and 8.3, a General
Partner shall be entitled to sell, transfer or assign its Partnership Interest
as General Partner to a Qualified Person at any time with the consent of the
other General Partner(s), if any (without Limited Partner approval).
(b) Subject to the provisions of Section 4.11 and 5.8, substitutions of
one person for another person as a General Partner may be made by the General
Partner at any time with the consent of the other General Partner(s), if any
(without Limited Partner approval) provided the substituted person is a
Qualified Person.
(c) In the event that a General Partner withdraws from the Partnership
or sells, transfers or assigns its entire Partnership Interest, the withdrawing,
selling, transferring or assigning General Partner shall be, and shall remain,
liable for all obligations and liabilities incurred by the Partnership for which
the General Partners were liable before such withdrawal, sale, transfer or
assignment shall have become effective but shall be free of any obligation or
liability incurred on account of the activities of the Partnership from and
after the time such withdrawal, sale, transfer or assignment shall have become
effective.
(d) Subject to the provisions of Section 3.6, the General Partner may at
any time designate additional persons to be General Partners, whose Partnership
Interest shall be such as are agreed upon by the General Partner and such
additional persons. Such additional persons shall become successor or additional
General Partners only upon meeting the conditions provided in Sections 8.2(a)
and (b).
8.2 Admission of a Successor or Additional General Partner. A person
shall be admitted as a General Partner of the Partnership only if the following
terms and conditions are satisfied:
(a) The successor person shall have accepted and agreed to be bound by
the terms and provisions of this Agreement by executing a counterpart hereof and
such other documents or instruments as the General Partner deems required or
appropriate in order to effect the admission of such person as a General
Partner; and
28
(b) If the successor person is a corporation, partnership or other
entity, it shall have provided the Partnership with evidence satisfactory to
counsel for the Partnership of its authority to become a General Partner and to
be bound by the terms and provisions of this Agreement.
8.3 Effect of Bankruptcy, Death, Withdrawal, Dissolution or
Incompetency of a General Partner.
(a) In the event of the Bankruptcy, death, withdrawal, dissolution or
incompetency of the General Partner, the Partnership shall be dissolved unless
those Partners holding a majority in interest of the remaining Partnership
Percentages elect to continue the business of the Partnership within ninety (90)
days after such event.
(b) Upon the Bankruptcy, death, withdrawal, dissolution or incompetency
of the General Partner where the business of the Partnership is continued in
accordance with Section 8.3(a), such General Partner shall immediately cease to
be a General Partner and its Partnership Interest shall be converted to that of
a Limited Partner with the same rights under Article IV to share in the Net
Profits and Losses, Net Cash Flow and proceeds from liquidation of the
Partnership. Nothing in this Section 8.3(b) shall affect any rights or
liabilities of the Bankrupt, deceased, withdrawn, dissolved or incompetent
General Partner which matured prior to the Bankruptcy, death, withdrawal,
dissolution or incompetency of such General Partner.
(c) If, at the time of the Bankruptcy, death, withdrawal, dissolution or
incompetency of a General Partner, such General Partner was not the sole General
Partner of the Partnership, the remaining General Partner or Partners shall (i)
give Notice to the Limited Partners of such Bankruptcy, death, withdrawal,
dissolution or incompetency and (ii) make such amendments of this Agreement and
execute and file for recordation such other documents or instruments as are
necessary to reflect the conversion of the Partnership Interest of the Bankrupt,
deceased, withdrawing, dissolved or incompetent General Partner in accordance
with Section 8.3(b).
ARTICLE IX
Transfer of Limited Partnership Interest
9.1 Restrictions on Transfer of Limited Partners' Interests.
(a) Except as provided in Section 9.4, no Limited Partner shall offer,
sell, assign, hypothecate, pledge or otherwise transfer in whole or in part its
Partnership Interest without the prior written consent of the General Partner,
which may be given or withheld in the sole discretion of the General Partner.
(b) As a condition to the granting of its consent to a sale, transfer,
assignment, hypothecation or pledge of any Partnership Interest, the General
Partner may, but shall not be obligated to, require that it receive an opinion
of counsel satisfactory to it that such proposed disposition or hypothecation
(i) may be effected without registration of the Partnership Interest under the
Securities Act of 1933, as amended, (ii) would not be in violation of any
applicable State securities or "Blue Sky" law (including investment suitability
standards), and (iii) would
29
not cause a termination of the Partnership for Federal income tax purposes or
result in the imposition of any transfer tax pursuant to applicable law.
(c) In no event shall a Limited Partner's Partnership Interest or any
portion thereof be sold, assigned or transferred to a minor or incompetent
unless by will or intestate succession.
9.2 Admission of Substitute Limited Partner.
(a) Notwithstanding the other provisions of this Article IX, an assignee
of the Partnership Interest of a Limited Partner (which shall be understood to
include any purchaser, transferee, donee or other recipient of any disposition
of such Partnership Interest) shall be deemed admitted as a Limited Partner of
the Partnership (sometimes referred to as a "Substitute Limited Partner") only
upon the satisfactory completion of the following:
(i) Consent of the General Partner shall have been given, which
consent may be evidenced by the execution by the General Partner of a
Certificate evidencing the admission of such person as a Limited Partner
and which consent may be given or withheld in the General Partner's sole
discretion;
(ii) The assignee shall have accepted and agreed to be bound by
the terms and provisions of this Agreement by executing a counterpart
hereof 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;
(iii) The assignee shall have delivered a letter containing a
representation that acquisition of its Partnership Interest is made as a
principal for its own account for investment purposes only and not with
a view to the resale or distribution of such Partnership Interest.
(iv) If the assignee is a corporation, partnership or other
entity, the assignee shall have provided the General Partner with
evidence satisfactory to counsel for the Partnership of its authority to
become a Limited Partner under the terms and provisions of this
Agreement;
(v) The assignee shall have executed a power of attorney
acceptable to the General Partner containing the terms and provisions
set forth in Article VII; and
(vi) The assignee shall have paid all reasonable legal fees and
administrative costs of the Partnership and the General Partner and
filing and publication costs in connection with his or its substitution
as a Limited Partner.
(b) A Substitute Limited Partner shall be treated as having become, and
appearing in the records of the Partnership as, a Partner as of the day the
conditions set forth in Section 9.2(a) are satisfied.
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(c) Any Limited Partner who shall assign all of his or its Partnership
Interest shall cease to be a Limited Partner of the Partnership except that
unless and until a Substitute Limited Partner is admitted in his or its stead
and place such assigning Limited Partner shall retain the statutory rights of an
assignor of a limited Partnership Interest under the Act (as modified by this
Agreement) and retain the obligations of a Limited Partner under the Act and
this Agreement.
9.3 Rights of Assignee of Partnership Interest.
(a) The rights of an assignee of his or its Partnership Interest who
does not become a Substitute Limited Partner shall be limited to receipt of his
or its share of Net Profits and Net Losses and Net Cash Flow pursuant to Article
IV and distributions upon liquidation and dissolution as determined under
Article X.
(b) The Partnership shall not be obligated for any purposes whatsoever
to recognize the assignment by any Limited Partner of his or its Partnership
Interest as permitted hereunder unless and until the Partnership has received
notice thereof, which notice must include such information and documentation
with respect to the assignment as the General Partner may reasonably require.
(c) Any person who is the assignee of all or any portion of a Limited
Partner's Partnership Interest but does not become a Substitute Limited Partner
and desires to make a further assignment of such 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 or its
Partnership Interest.
9.4 Effect of Bankruptcy, Death or Incompetence of a Limited Partner.
The Bankruptcy of a Limited Partner or the death of a Limited Partner or an
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, in such case, the business of the Partnership shall
continue. If a Limited Partner becomes Bankrupt, the trustee or receiver of his
or its estate or, if he dies, his executor, administrator or trustee or if he is
adjudicated incompetent, his committee, guardian or conservator, shall have the
rights of an assignee hereunder but shall not become a Substitute Limited
Partner except in accordance with the terms of Section 9.2.
ARTICLE X
Dissolution and Liquidation
10.1 Liquidation. In the event of the termination of the Partnership
pursuant to Section 2.6, the General Partner (or if there be none, then a
liquidation committee ("Liquidation Committee") appointed by the Limited
Partners owning, in the aggregate, a majority in interest of the Partnership
Percentages then held by the Limited Partners), shall commence to wind up the
affairs of the Partnership and to liquidate its assets. Subject to the
provisions of Section 5.8, the General Partner (or the Liquidation Committee)
shall have full right and unlimited discretion to determine the time, manner and
terms of any sale or sales of Partnership property pursuant to
31
such liquidation, having due regard to the activity and condition of the
relevant market and general financial and economic conditions. In the event that
the General Partner (or the Liquidation Committee) determines, in its sole and
absolute discretion, that it is necessary or (subject to the provisions of
Section 5.8) desirable to make a distribution of Partnership property in kind,
such property shall be transferred and conveyed to the Partners so as to vest in
each as a tenant in common an undivided interest in the whole of said property
equal to his or its interest in the distribution of proceeds pursuant to Section
10.2. Subject to the provisions of Section 10.2, in the event of the sale of
Partnership assets for a consideration including, in whole or in part, deferred
obligations, the liquidation of the Partnership shall not be deemed finally
terminated until the Partnership shall have sold all or substantially all of its
assets for cash or received cash payments in full with respect to all deferred
obligations received by the Partnership in connection with the sale of
Partnership assets.
10.2 Distribution of Proceeds. The net proceeds resulting from the
liquidation of the Partnership's properties following a dissolution of the
Partnership shall be distributed to the Partners and applied in the following
order of priority (except as provided in Section 4.9):
(a) first, to the payment of the debts and liabilities of the
Partnership (other than debts and liabilities owed to the General Partner or any
of its Affiliates);
(b) second, to the payment of Liquidated Damages, if any;
(c) third, to the payment of the debts and liabilities of the
Partnership to the General Partner or any of its Affiliates;
(d) fourth, to the setting up of any Reserves that the General Partner
or the Liquidation Committee deems reasonably necessary, in its sole and
absolute discretion, to provide for any contingent or unforeseen liabilities or
obligations of the Partnership (it being understood however, that any funds so
reserved shall be distributed in accordance with the provisions of this Section
10.2 after the obligation for which the Reserve was established has been
satisfied); and
(e) the balance, if any, to the Partners in accordance with their
positive Capital Account balances determined after (i) taking into account all
Capital Account adjustments for the taxable year during which the dissolution
occurs (other than those made pursuant to this Section 10.2(c)) and (ii)
revaluing all Partnership property to be distributed to the Partners at its
Gross Asset Values in accordance with the rules of Treas. Reg. Section
1.704-l(b)(2)(iv)(f) (except that for purposes hereof, KBLP shall be entitled to
no more than an amount equal to the KBLP Distribution plus KBLP's share of
undistributed Net Profits previously allocated to KBLP).
In the event the Partnership is "liquidated" within the meaning of
Section 1.704-l(b)(2)(ii)(g) of the Regulations, such amounts shall be
distributed by the end of the taxable year in which the liquidation occurs or,
if later, within 90 days of such liquidation (the "Timing Requirement") and no
Partner shall have any obligation to restore a deficit in its Capital Account
(after giving effect to all contributions, distributions and allocations for all
taxable years,
32
including the year during which such liquidation occurs), no such deficit being
considered a debt owed to the Partnership or any other person for any purpose
whatsoever.
If the General Partner (or the Liquidating Committee, as the case may
be) in its sole and absolute discretion determines that the Timing Requirement
shall not be met, all or any portion of the distributions that would otherwise
be made to the Partners pursuant to Section 10.2 may be distributed to the
General Partner (or the Liquidating Committee, as the case may be) in trust for
the benefit of the Partners for the purposes of liquidating Partnership assets,
collecting amounts owed to the Partnership, and paying any contingent or
unforeseen liabilities or obligations of the Partnership. The assets of any such
trust shall be distributed to the Partners from time to time, in the sole and
absolute discretion of the General Partner (or the Liquidating Committee, as the
case may be), in the same proportions as the amount distributed to such trust by
the Partnership would otherwise have been distributed to the Partners pursuant
to this Agreement.
10.3 Accounting. Within a reasonable time following the completion of
the liquidation of the Partnership's properties, the General Partner (or the
Liquidation Committee) shall supply to each of the Partners a statement setting
forth the assets and the liabilities of the Partnership as of the date of
completion of liquidation and each Partner's pro rata portion of distribution
pursuant to Section 10.2.
10.4 Certificate of Cancellation. Upon the completion of the liquidation
of the Partnership and the distribution of all Partnership funds, the
Partnership shall terminate and the General Partner (or the Liquidation
Committee) shall have the authority to execute and file a Certificate of
Cancellation of the Partnership as well as any and all other documents required
to effectuate the dissolution and termination of the Partnership.
10.5 Right Limited To Partnership Assets. Each Partner shall look solely
to the assets of the Partnership for all distributions with respect to the
Partnership, the return of his or its capital contribution thereto and his or
its share of Net Cash Flow and shall have no recourse therefor, upon dissolution
or otherwise, against any other Partner except as provided in the last paragraph
of Section 10.2. No Partner shall have any right to demand or receive property
other than cash upon dissolution and termination of the Partnership.
ARTICLE XI
Amendments
11.1 Right of General Partner to Amend. Subject to Sections 3.6, 5.8 and
11.2, the General Partner may from time to time amend this Agreement as the
General Partner deems advisable, in its sole and absolute discretion, without
seeking or obtaining the approval or consent of any Limited Partner and may
execute counterparts to this Agreement, and such other documents as it deems
appropriate to reflect such amendment on behalf of each Limited Partner pursuant
to the Power of Attorney granted by Article VII hereof.
11.2 Limitations on Amendments. Notwithstanding the provisions of
Section 11.1, no amendment to this Agreement may:
33
(i) enlarge the obligations of any Partner under this Agreement
or convert the Partnership Interest of any Limited Partner into the
Partnership Interest of a General Partner or modify the limited
liability of any Limited Partner without the consent of such Partner;
(ii) subject to the provisions of Section 3.6, alter the rights
of any Partner in Net Profits and Net Losses, Net Cash Flow or
liquidation proceeds, without the consent of such Partner;
(iii) cause the Partnership to be taxable as a corporation
without the consent of all Partners;
(iv) amend Sections 4.11, 5.8, 11.1 or 11.2 without the consent
of KBLP;
(v) amend this Article XI without the consent of all Partners; or
(vi) amend this Agreement in any other respect if the effect of
such amendment would materially adversely effect KBLP's rights and
benefits hereunder.
11.3 Amendments on Admission or Withdrawal of Partners.
(a) If this Agreement shall be amended as a result of adding or
substituting a Limited Partner, the amendment to this Agreement shall be signed
by the General Partner and by the person to be substituted or added.
(b) If this Agreement shall be amended to reflect the designation of an
additional or successor General Partner, such amendment shall be signed by the
other General Partner(s), if any, and by such additional or successor General
Partner.
(c) If this Agreement shall be amended to reflect the withdrawal of a
General Partner and the business of the Partnership is continued, such amendment
shall be signed by the remaining or successor General Partner(s).
(d) Notwithstanding the foregoing, no amendment to this Agreement shall,
without KBLP's consent, adversely affect KBLP's rights to Liquidated Damages in
the circumstances described in Sections 4.11 and 5.8, or to receive the Special
Final Distribution in the event of an election by the Partnership to make such a
distribution as set forth in Section 4.9.
11.4 Management of the Partnership. No Limited Partner shall take part
in the management or control of the business of the Partnership or transact any
business in the name of the Partnership. No Limited Partner shall have the power
or authority to bind the Partnership or to sign any Agreement or document in the
name of the Partnership. No Limited Partner shall have any power or authority
with respect to the Partnership except insofar as the consent of the Limited
Partner shall be expressly required herein.
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ARTICLE XII
General Provisions
12.1 Notices. All notices required or permitted to be given hereunder
shall be in writing and addressed to the addressee at the addresses set forth on
the signature pages hereto or to such other address as the addressee shall have
previously notified the sender of in writing. Personal or overnight mail
delivery, facsimile communication or the mailing of a notice by registered or
certified mail, return receipt requested, shall be sufficient service and shall
be effective as of the date upon which it is delivered (or delivery is refused
or postal authorities designate the notice as non-deliverable, as the case may
be) in the case of personal or overnight mail delivery or certified or
registered mail or upon receipt of confirmed answerback in the case of facsimile
transmission.
12.2 Governing Law. This Agreement shall be governed by the laws of the
State of Delaware, without regard to its conflicts of law principles.
12.3 Headings. The headings of the articles and sections of this
Agreement are inserted for convenience only and are not to be deemed to
constitute a part of this Agreement.
12.4 Additional Documents. Each of the parties hereto agrees to execute,
acknowledge and verify, if required to do so, any and all further or additional
documents as may be reasonably necessary to fully effectuate the terms of this
Agreement.
12.5 Counterparts. This Agreement may be executed in counterparts, each
of which shall be deemed an original, but all of which together shall constitute
one and the same document.
12.6 Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the executors, administrators, heirs or other successors
and the permitted assigns of the respective Partners.
12.7 Waiver. The waiver of any breach of any term, covenant or condition
of this Agreement by any of the parties hereto shall not constitute a continuing
waiver or a waiver of any subsequent breach, either of the same or any other
additional or different term, covenant or condition of this Agreement.
12.8 Severability. The parties hereby agree that in the event any court
of competent jurisdiction determines that any provision of this Agreement is
unlawful or unenforceable then, in that event, each and all remaining provisions
shall remain in full force and effect.
12.9 Merger. This Agreement, together with the Contribution Agreement,
sets forth (and is intended by all parties to be an integration of) all of the
promises, agreements and understandings among the parties hereto with respect to
the Partnership, the Partnership business and the property and assets of the
Partnership, and there are no promises, agreements or understandings, oral or
written, express or implied, among them other than as set forth or therein.
35
12.10 Pronouns. All the pronouns and variations thereof shall be deemed
to refer to the masculine, feminine, neuter, singular or plural as the identity
of the person or persons may require.
12.11 Certificate of Limited Partnership and Amendments. Upon written
request of any Limited Partner, the General Partner shall deliver to such
Limited Partner copies of any Certificate of Limited Partnership, Certificate of
Amendment, Restated Certificate of Limited Partnership or Certificate of
Cancellation filed pursuant to the Act in respect of
the Partnership.
12.12 [Intentionally Deleted]
12.13 Signatures. Each Limited Partner, Substitute Limited Partner,
additional General Partner and successor General Partner shall become a
signatory hereto by signing such number of counterpart signature pages to this
Agreement and such other instrument or instruments in such manner and at such
time as the General Partner shall determine. By so signing, each Limited
Partner, Substitute Limited Partner, successor General Partner or additional
General Partner, as the case may be, shall be deemed to have adopted and be
bound by all provisions of this Agreement, as amended from time to time;
provided, however, no such counterpart shall be binding unless and until it
shall have been accepted by the General Partner.
36
IN WITNESS WHEREOF the undersigned have executed this Agreement on the
day and year first above written.
GENERAL PARTNER:
FLORIDA SONESTA CORPORATION, 000 Xxxxxxxxx Xxxxxx
a Florida corporation Xxxxxx, Xxxxxxxxxxxxx 00000
Attn: Xxxxx X. Xxxxxxxxx
Facsimile No.: (000) 000-0000
By:
-----------------------------
Its
----------------------
With a copy to:
Xxxx, Xxxx & Xxxxx
Three First National Plaza
Suite 3300
Xxxxxxx, Xxxxxxxx 00000
Attn: Xxxxx X. Xxxxx
Facsimile No.: (000) 000-0000
LIMITED PARTNERS:
KEY BISCAYNE LAND CORPORATION, 000 Xxxxxxxxx Xxxxxx
a Florida corporation Xxxxxx, Xxxxxxxxxxxxx 00000
Attn: Xxxxx X. Xxxxxxxxx
Facsimile No.: (000) 000-0000
By:
-----------------------------
Its
----------------------
With a copy to:
Xxxx, Xxxx & Xxxxx
Three First National Plaza
Suite 3300
Xxxxxxx, Xxxxxxxx 00000
Attn: Xxxxx X. Xxxxx
Facsimile No. (000) 000-0000
37
KEY BISCAYNE LIMITED c/o Strategic Realty Advisors, Inc.
PARTNERSHIP, 000 Xxxxxx Xxxx
a Florida limited partnership Xxxxx 000
Xxxxxxxxxx, Xxxxxxxx 00000
By: Key Biscayne Beach Hotel Attn: Xxxx X. Xxxxx,
Associates, Ltd., a President and Chief
Florida limited Executive Officer
partnership Facsimile No. (000) 000-0000
By: VMS Realty Investment, With a copy to:
Ltd., an Illinois limited
partnership, a general Xx. Xxxx Xxxxxxx
partner Sonnenschein, Nath & Xxxxxxxxx
8000 Sears Tower
By: 000 Xxxxx Xxxxxx Xxxxx
----------------------- Xxxxxxx, Xxxxxxxx 00000
Facsimile No. (000) 000-0000
38
