SECOND AMENDMENT
TO
AGREEMENT OF LIMITED PARTNERSHIP
OF
HERSHA HOSPITALITY LIMITED PARTNERSHIP
THIS SECOND AMENDMENT TO THE AMENDED AND RESTATED AGREEMENT OF LIMITED
PARTNERSHIP (this "Second Amendment") dated as of April 21, 2003, is entered
into by HERSHA HOSPITALITY TRUST, a Maryland real estate investment trust, as
general partner (the "General Partner") of HERSHA HOSPITALITY LIMITED
PARTNERSHIP, a limited partnership formed under the laws of the Commonwealth of
Virginia (the "Partnership"), for itself and on behalf of the limited partners
of the Partnership, and CNL HOSPITALITY PARTNERS, L.P., a Delaware limited
partnership ("CHP").
WHEREAS, Section 4.02(a) of the Amended and Restated Agreement of Limited
Partnership of the Partnership dated January 26, 1999 (as amended by that
certain Amendment dated December 31, 1999, the "Partnership Agreement")
authorizes the General Partner to cause the Partnership to issue additional
Partnership Units in one or more classes or series, with such designations,
preferences and relative, participating, optional or other special rights,
powers and duties as shall be determined by the General Partner, subject to the
provisions of such section; and
WHEREAS, pursuant to the authority granted to the General Partner pursuant
to Sections 4.02(a) and Article XI of the Partnership Agreement, the General
Partner desires to amend the Partnership Agreement (i) to establish a new class
of Partnership Units, the Series A Preferred Units (as hereinafter defined), and
to set forth the designations, rights, powers, preferences and duties of such
Series A Preferred Units, (ii) to issue the Series A Preferred Units to CHP and
to admit CHP as an additional Limited Partner and (iii) to make certain other
changes to the Partnership Agreement.
NOW, THEREFORE, in consideration of good and valuable consideration, the
receipt and sufficiency of which hereby are acknowledged, the General Partner
hereby amends the Partnership Agreement as follows:
1. Designation; Rank.
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(a) A series of Partnership Units in the Partnership designated as
the "10.5% Series A Preferred Units" (the "Series A Preferred Units") is hereby
established. The maximum number of Series A Preferred Units shall be 350,000.
(b) The Series A Preferred Units shall rank (i) senior to any
class of Partnership Units of the Partnership whether or not existing on the
date hereof, which shall include, without limitation, all Partnership Units
outstanding as of the date hereof and any other class or series of Partnership
Units, either specifically ranking by the terms thereof junior to the
Series A Preferred Units or not specifically ranking by their terms senior to or
on parity with the Series A Preferred Units (collectively, the "Junior Units"),
(ii) on parity with any class or series of Partnership Units specifically
ranking by their terms on parity with the Series A Preferred Units, and (iii)
junior to any class or series of Partnership Units specifically ranking by their
terms senior to the Series A Preferred Units, in each case, as to payment of
distributions, voting, distributions of assets upon liquidation, dissolution or
winding-up, whether voluntary or involuntary, or otherwise.
(c) In connection with the issuance of the Series A Preferred
Units to CHP, for purposes of making allocations of Net Profit and Net Loss, the
Partnership shall be deemed to make an election to cause an "interim closing" of
the Partnership's books as permitted by Section 706 of the Code and the
Regulations thereunder.
2. Distribution Rights.
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(a) Each Series A Preferred Unit shall entitle the holder thereof
to receive distributions out of any assets legally available therefor, prior to
and in preference to any declaration or payment of any distribution on any
Junior Units pursuant to Section 5.02 of the Partnership Agreement and pari
passu with any Partnership Units ranking on parity with the Series A Preferred
Units as to distributions. Distributions shall be payable when and as
authorized by the General Partner. Distributions on each Series A Preferred
Unit shall accrue at 10.5% per annum (the "Distribution Rate") on the Original
Issue Price which distributions will commence accruing on the Original Issue
Date. Distributions on the Series A Preferred Units shall be payable in cash in
arrears no later than the twentieth (20th) day after the end of each quarter
(each a "Distribution Payment Date"), commencing with the quarter ending June
30, 2003, to holders of record as of the close of business on the last business
day of the applicable quarter. Distributions shall accrue, but not compound,
whether or not they have been declared and whether or not there are Profits,
surplus or other funds of the Partnership legally available for the payment of
distributions. The date on which the Partnership initially issues a Series A
Preferred Unit shall be referred to as the "Original Issue Date" regardless of
the number of transfers of such Series A Preferred Unit made on the transfer
records maintained by or for the Partnership and regardless of the number of
certificates that may be issued to evidence such share.
(b) The Partnership shall not (i) pay or set aside for payment any
distributions on Junior Units or (ii) redeem, repurchase or otherwise acquire
any Junior Units, except as required by Section 5.03 of the Partnership
Agreement and in a manner which satisfies Section 305(b) of the Code, until all
accumulated, accrued and unpaid distributions have been paid on the Series A
Preferred Units through the last preceding Distribution Payment Date.
(c) The amount of distributions payable for each quarterly period
for the Series A Preferred Units shall be computed by multiplying the Original
Issue Price by the Distribution Rate and dividing the result by four. The
amount of distributions payable for the initial period or any other period
shorter or longer than a full quarterly period shall be computed on the basis of
twelve 30-day months and a 360-day year.
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(d) Distribution payments shall be made by wire transfer to an
account designated by each holder of the Series A Preferred Units or, if no
account information is provided to the Partnership by a holder of the Series A
Preferred Units, distribution payments shall be made by check delivered by first
class mail to the address of such holder as set forth in the records of the
Partnership.
3. Allocations.
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Sections 5.01(a) and (b) of the Partnership Agreement are hereby
deleted and replaced by sections (a) and (b), below. For all purposes of the
Partnership Agreement as amended by this Second Amendment, the term "Percentage
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Interest" shall be deemed to refer to the percentage ownership interest in the
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Partnership of each Partner with respect to its Partnership Units, other than
Series A Preferred Units, and "Partnership Units" shall be deemed to refer to
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Partnership Units other than the Series A Preferred Units, but shall include
Partnership Units issued upon actual conversion of Series A Preferred Units into
Partnership Units.
(a) Net Profit.
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Except as otherwise provided herein, Net Profit for any fiscal year or
other applicable period shall be allocated in the following order and priority:
(i) first, to Limited Partners holding Series A Preferred
Units, pro rata in proportion to the respective share of such Series A Preferred
Units each Limited Partner holds, to the extent that Net Loss previously
allocated to such holders pursuant to Section 5.01(b)(v) below for all prior
fiscal years or other applicable periods exceeds Net Profit previously allocated
to such Partners pursuant to this Section 5.01(a)(i) for all prior fiscal years
or other applicable periods,
(ii) second, to the General Partner and the Limited Partners
holding Partnership Units in proportion to their respective Percentage Interests
to the extent that Net Loss previously allocated to such holders pursuant to
Section 5.01(b)(iii) below for all prior fiscal years or other applicable
periods exceeds Net Profit previously allocated to such Partners pursuant to
this Section 5.01(a)(ii) for all prior fiscal years or other applicable periods,
(iii) third, to the Limited Partners holding Series A
Preferred Units until each such Series A Preferred Unit has been allocated Net
Profit equal to the excess of (x) the cumulative amount of preferred
distributions such Limited Partners have received for all fiscal years or other
applicable period or to the date of redemption, to the extent such Series A
Preferred Units are redeemed during such period, over (y) the cumulative Net
Profit allocated to such Limited Partners, pursuant to this Section 5.01(a)(iii)
for all prior fiscal years or other applicable periods (and, within each such
class, pro rata in proportion to the respective share of such Series A Preferred
Units each Limited Partner holds as of the last day of the period for which such
allocation is being made),
(iv) fourth, to the General Partner until the aggregate
amount of Net Profit allocated to the General Partner under this Section
5.01(a)(iv) for the current and all prior years equals the aggregate Preferred
Return distributed to the General Partner under Section 5.02(a)(i) for the
current and all prior years, taking into account the distributions to the
General
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Partner that are deemed to have been distributed on December 31 of each year
pursuant to Section 5.02(f) hereof,
(v) fifth, to the Limited Partners holding Partnership Units
in accordance with their respective Percentage Interests until the aggregate
amount of Net Profit allocated to such Limited Partners under this Section
5.01(a)(v) for the current and all prior years equals the aggregate Preferred
Return distributed to such Limited Partners for the current and all prior years,
and
(vi) thereafter, to the Partners holding Partnership Units in
accordance with their respective Percentage Interests.
(b) Net Loss.
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Except as otherwise provided herein, Net Loss for any fiscal year or
other applicable period shall be allocated in the following order and priority:
(i) first, to the Partners holding Partnership Units in
accordance with their respective Percentage Interests to the extent of Net
Profit previously allocated to such Partners pursuant to Section 5.01(a)(vi)
above for all prior fiscal years or other applicable period exceeds Net Loss
previously allocated to such Partners pursuant to this Section 5.01(b)(i) for
all prior fiscal years or other applicable periods,
(ii) second, to the Limited Partners holding Partnership
Units in accordance with their respective Percentage Interests to the extent of
Net Profit previously allocated to such Limited Partners pursuant to Section
5.01(a)(v) above for all prior fiscal years or other applicable period exceeds
Net Loss previously allocated to such Limited Partners pursuant to this Section
5.01(b)(ii) for all prior fiscal years or other applicable periods,
(iii) third, to the General Partner to the extent of Net
Profit previously allocated to the General Partner pursuant to Section
5.01(a)(iv) above for all prior fiscal years or other applicable period exceeds
Net Loss previously allocated to the General Partner pursuant to this Section
5.01(b)(iii) for all prior fiscal years or other applicable periods,
(iv) fourth, to the General Partner and the Limited Partners
holding Partnership Units in proportion to their respective Percentage Interests
until the adjusted Capital Account (including for this purpose any amounts a
Partner is obligated to contribute to the capital of the Partnership or is
deemed obligated to contribute pursuant to Regulations Section
1.704-1(b)(2)(ii)(c)(2)) of each Partner with respect to such Partnership Units
is reduced to zero, and
(v) thereafter, to the Limited Partners holding Series A
Preferred Units, pro rata in proportion to the respective share of such Series A
Preferred Units each Limited Partner holds, until the adjusted Capital Account
(modified in the same manner as in clause (iv)) of each such Limited Partner
with respect to such Series A Preferred Units is reduced to zero.
It is the intention of the parties hereunder that the aggregate
Capital Account balance of
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the holders of Series A Preferred Units at any date shall not exceed the amount
of the original Capital Contribution of such holder plus all accrued and unpaid
distributions thereon, whether or not declared, to the extent not previously
distributed.
(c) Notwithstanding anything to the contrary contained herein, in
connection with the liquidation of the Partnership or the interest of a holder
of Series A Preferred Units, and prior to making any other allocations of Net
Profit or Net Loss, items of income and gain or deduction and loss shall first
be allocated to holders of Series A Preferred Units in such amounts as is
required to cause each such Partner's adjusted Capital Account balance (taking
into account any amounts such Partner is obligated to contribute to the capital
of the Partnership or is deemed obligated to contribute pursuant to Regulations
Section 1.704-1(b)(2)(ii)(c)(2)) to equal the amount each such Partner is
entitled to receive pursuant to the provisions of Sections 4 or 5(l) hereof.
(d) For purposes of this Section 3, "Net Profit" means the excess
of the Partnership's Profit over the Partnership's Loss for any fiscal year or
portion thereof, and "Net Loss" means the excess of the Partnership's Loss over
the Partnership's Profit for any fiscal year or portion thereof.
(e) Notwithstanding anything to the contrary above, until such
time as the portion of the Net Income of the Partnership which is received or
accrued from each tenant of the Partnership and its affiliates which is directly
or indirectly owned by the Partnership, taking into account the provisions of
Section 856(d)(5) of the Code, qualifies as "rents from real property" derived
from a "taxable REIT subsidiary" of the General Partner (within the meaning of
Sections 856(d) and 856(l) of the Code), then in lieu of the income allocation
to the Limited Partners holding Series A Preferred Units set forth in Section
3(a)(iii) above, items of income and gain, to the extent remaining after making
the allocations required by Section 3(a)(i),(ii) and (iii) above, shall be
allocated to the Limited Partners holding Series A Preferred Units until each
such holder of Series A Preferred Units has been allocated items of income and
gain in an amount equal to the excess of (x) the cumulative amount of preferred
distributions such Limited Partner has received for all fiscal years or other
applicable period , over (y) the cumulative items of income and gain allocated
to such Limited Partners pursuant to this Section 5.01(e) for all prior fiscal
years or other applicable periods (and, with respect to each such Limited
Partner, pro rata in proportion to the respective share of such Series A
Preferred Units each Limited Partner holds as of the last day of the period for
which such allocation is being made), and all such allocations shall be taken
into account for purposes of subsequent allocations made pursuant to Section
3.01(a)(iii) above.
4. Liquidation Rights.
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(a) In the event of any liquidation, dissolution or winding up of
the Partnership, whether voluntary or involuntary, after payment or provision
for payment of debts and other liabilities of the Partnership, each holder of
Series A Preferred Units, before any distribution or payment is made upon any
Junior Units pursuant to Section 5.06 of the Partnership Agreement, shall be
entitled to receive, out of the assets of the Partnership available for
distribution to the Partners, the sum of (A) $100.00 per Series A Preferred Unit
and (B) all
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accrued but unpaid distributions (if any) payable with respect to such Series A
Preferred Units the (the "Liquidation Preference").
(b) In the event the assets to be distributed among the holders of
the Series A Preferred Units upon any liquidation, dissolution or winding up of
the Partnership, whether voluntary or involuntary, shall be insufficient to
permit full payment of the Liquidation Preference and similar payments on any
other class of Partnership Units ranking on a parity with the Series A Preferred
Units upon liquidation, then the holders of the Series A Preferred Units and
such other Partnership Units shall share ratably in any such distribution of the
Partnership's assets in proportion to the full respective distributable amounts
to which they are entitled.
(c) Upon any such liquidation, dissolution or winding up of the
Partnership, after the holders of the Series A Preferred Units and any other
class of beneficial interests ranking on a parity with the Series A Preferred
Units upon liquidation shall have been paid in full in accordance with the
rights and preferences to which they are entitled, the remaining net assets of
the Partnership shall be distributed in accordance with Section 5.06 of the
Partnership Agreement.
(d) For purposes of this Section, a liquidation, dissolution or
winding up of the Partnership shall be deemed to be occasioned by, or to
include, (A) the acquisition after the date of this Second Amendment of a
majority of the Partnership Interests by an entity other than the General
Partner by means of any transaction or series of related transactions
(including, without limitation, any reorganization, merger or consolidation, but
excluding any merger effected exclusively for the purpose of changing the
domicile of the Partnership) in which outstanding Partnership Interests are
exchanged for securities or other consideration issued, or caused to be issued
by the acquiring entity or its subsidiary (an "Acquisition"), or (B) the sale,
lease, exchange or other transfer (in one transaction or a series of
transactions) of all or substantially all of the assets of the Partnership (an
"Asset Transfer"), unless in each of the cases set forth in (A) and (B) of this
Section 4(d), the Partners immediately prior to such Acquisition or Asset
Transfer will, immediately after such Acquisition or Asset Transfer (by virtue
of securities issued as consideration for the Partnership's Acquisition or Asset
Transfer or otherwise) hold at least 50% of the voting power of the surviving,
continuing or purchasing entity.
(e) Written notice of such liquidation, dissolution or winding up,
stating a payment date, the amount of the Liquidation Preference and the place
where said sums shall be payable shall be given by mail, postage prepaid, not
less than 30 or more than 60 days prior to the payment date stated therein, to
the holders of record of the Series A Preferred Units, such notice to be
addressed to each such holder at his post office address as shown on the records
of the Partnership.
(f) Whenever the distribution provided for in this Section 4 shall
be payable in property other than cash, the value of such property shall be the
fair market value thereof as determined in good faith by a majority of the
"independent" Trustees serving on the Board of Trustees of the General Partner.
For purposes of this provision, the "independent" Trustees shall be those
Trustees serving on the Board of Trustees of the General Partner who satisfy the
requirements for treatment as an "independent" trustee or "independent" director
under the rules of the American Stock Exchange.
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5. Exchange. The holders of Series A Preferred Units shall have the
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following rights to exchange the Series A Preferred Units for (i) priority class
A common shares of beneficial interest in the General Partner (the "Priority
Class A Common Shares"), or (ii) Series A Preferred Shares of beneficial
interest in the General Partner (the "Series A Preferred Shares") or (iii)
Partnership Units (the "Exchange Rights"):
(a) Optional Exchange. Subject to and in compliance with the
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provisions of this Section 5, any Series A Preferred Units may, at the option of
the holder, be exchanged at any time for fully paid and nonassessable: (i)
Priority Class A Common Shares, (ii) Series A Preferred Shares or (iii)
Partnership Units. The number of shares of Priority Class A Common Shares to
which a holder of Series A Preferred Units shall be entitled upon exchange shall
be the product obtained by multiplying the Common Exchange Rate then in effect
(determined as provided in Section 5(b)(i)) by the number of Series A Preferred
Units being exchanged therefor. The number of Series A Preferred Shares to
which a holder of Series A Preferred Units shall be entitled upon exchange shall
be the product obtained by multiplying the Series A Exchange Rate then in effect
(determined as provided in Section 5(b)(ii)) by the number of Series A Preferred
Units being exchanged therefor. The number of Partnership Units to which a
holder of Series A Preferred Units shall be entitled upon exchange shall equal
the product obtained by multiplying the Partnership Unit Exchange Rate then in
effect (determined as provided in Section 5(b)(iii)) by the number of Series A
Preferred Units being exchanged therefor.
(b) Exchange Rate.
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(i) The exchange rate in effect at any time for exchange of
the Series A Preferred Units for Priority Class A Common Shares (the "Common
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Exchange Rate") shall be the quotient obtained by dividing (x) $100.00
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(hereinafter, the "Original Issue Price"), plus the per share amount of all
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accrued but unpaid distributions outstanding on the Series A Preferred Units to
be converted by (y) the Exchange Price, calculated as provided in Section
5(c)(i).
(ii) The exchange rate in effect at any time for exchange of
the Series A Preferred Units for Series A Preferred Shares (the "Series A
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Exchange Rate") shall be the quotient obtained by dividing (x) the Original
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Issue Price, plus the per share amount of all accrued but unpaid distributions
outstanding on the Series A Preferred Units to be converted by (y) the Series A
Exchange Price, calculated as provided in Section 5(c)(ii).
(iii) The exchange rate in effect at any time for exchange of
the Series A Preferred Units for Partnership Units (the "Partnership Unit
----------------
Exchange Rate") shall be the quotient obtained by dividing (x) the Original
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Issue Price, plus the per share amount of all accrued but unpaid distributions
outstanding on the Series A Preferred Units to be converted by (y) the
Partnership Unit Exchange Price, calculated as provided in Section 5(c)(iii).
(c) Exchange Price.
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(i) The exchange price with respect to exchange of the Series
A Preferred Units for Priority Class A Common Shares shall initially be equal to
$6.7555 per share (as adjusted as hereinafter provided (the "Common Exchange
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Price")).
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(ii) The exchange price with respect to exchange of the
Series A
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Preferred Units for Series A Preferred Shares shall initially be equal to $100
per share (the "Series A Exchange Price").
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(iii) The exchange price with respect to exchange of the
Series A Preferred Units for Partnership Units shall initially be equal to
$6.7555 per unit (the "Partnership Unit Exchange Price").
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(iv) Each of the initial Common Exchange Price, the initial
Series A Exchange Price and the initial Partnership Unit Exchange Price shall be
adjusted from time to time in accordance with this Section 5. All references to
the Common Exchange Price, the Series A Exchange Price, or the Partnership Unit
Exchange Price herein shall mean such exchange price as so adjusted.
(v) In the event Series A Preferred Units are exchanged for
Partnership Units, the Partnership Interest associated with each such
Partnership Unit shall be the percentage obtained by dividing the Partnership
Units so exchanged by the total number of Partnership Units then issued and
outstanding immediately following such exchange.
(d) Mechanics of Exchange.
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(i) The Exchange Rights in this Section 5 shall be exercised
by the holder thereof by giving written notice that the holder elects to
exchange a stated number of Series A Preferred Units into either Priority Class
A Common Shares, Series A Preferred Shares or Partnership Units and by surrender
of a certificate or certificates (if any) for the Series A Preferred Units so to
be converted and delivery of the undertaking described in clause (ii) to the
Partnership at its principal office (or such other office or agency of the
Partnership as the General Partner may designate by notice in writing to the
holder or holders of the Series A Preferred Units) at any time during its usual
business hours on the date set forth in such notice, together with a statement
of the name or names (with addresses), subject to compliance with Article VII of
the General Partner's Declaration of Trust (the "Declaration") and applicable
laws to the extent such designation shall involve a transfer, in which the
certificate or certificates for Priority Class A Common Shares, Series A
Preferred Shares or Partnership Units as the case may be, shall be issued.
Within five (5) business days after the receipt by the Partnership of the
written notice referred to in this Subsection 5(d), surrender of the certificate
or certificates (if any) for the Series A Preferred Units to be exchanged and
delivery of the undertaking described in clause (ii), the Partnership shall
issue and deliver, or cause to be issued and delivered, to the holder,
registered in such name or names as such holder may direct, subject to
compliance with Article VII of the Declaration and applicable laws to the extent
such designation shall involve a transfer, a certificate or certificates for the
number of whole Priority Class A Common Shares, Series A Preferred Shares or
Partnership Units, as the case may be, issuable upon the exchange of such Series
A Preferred Units. To the extent permitted by law, such exchange shall be
deemed to have been effected as of the close of business on the date on which
such written notice shall have been received by the Partnership and the
certificate or certificates for such share or shares shall have been surrendered
as aforesaid, and at such time the rights of the holder of such Series A
Preferred Units shall cease, and the person or persons in whose name or names
any certificate or certificates for Priority Class A Common Shares, Series A
Preferred Shares or Partnership Units, as the case may be, shall be issuable
upon such exchange shall be deemed to have become the
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holder or holders of record of the shares represented thereby.
(ii) It shall be a condition to the exercise of the Exchange
Rights that each proposed registered holder of the Priority Class A Common
Shares, Series A Preferred Shares or Partnership Units shall have executed and
delivered to the Partnership an undertaking to reimburse the Partnership or HT,
as the case may be, for the amount of any "unearned dividends or distributions"
with respect to such shares or units, as the case may be. The per share or unit
amount of such "unearned dividends or distributions" shall be equal to the
product of (A) the amount of the per share or unit dividend or distribution, as
the case may be, paid on the Priority Class A Common Shares, Series A Preferred
Shares or Partnership Units in respect of the next record date which is on or
after the effective date of the exchange (the record date for which is
hereafter referred to as the "Current Record Date") multiplied by (B) a
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fraction, the numerator of which is the number of days in the period beginning
with the day following the record date for the preceding dividend or
distribution payment date (the "Prior Record Date") and ending with the
effective date of the exchange and the denominator of which is the number of
days in the period beginning with the day following the Prior Record Date and
ending on the Current Record Date. Such undertaking shall acknowledge that the
certificates representing the Priority Class A Common Shares, Series A Preferred
Shares or Partnership Units, as the case may be, may bear a legend referring to
the provisions of this clause (ii) and such undertaking, which shall be binding
on any transferee of such shares.
(e) Adjustment for Shares Splits and Combinations. If the General
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Partner shall, at any time or from time to time after the Original Issue Date,
effect a subdivision of the outstanding Priority Class A Common Shares, Series A
Preferred Shares or Partnership Units without the Partnership effecting a
corresponding subdivision of the Series A Preferred Units, the Common Exchange
Price, the Series A Exchange Price or the Partnership Unit Exchange Price, as
the case may be, in effect immediately before that subdivision shall be
proportionately decreased. Conversely, if the General Partner shall, at any
time or from time to time after the Original Issue Date, combine the outstanding
Priority Class A Common Shares, Series A Preferred Shares or Partnership Units
into a smaller number of shares without the Partnership effecting a
corresponding combination of the Series A Preferred Units, the Common Exchange
Price, the Series A Exchange Price or the Partnership Unit Exchange Price, as
the case may be, in effect immediately before the combination shall be
proportionately increased. Any adjustment under this Subsection 5(e) shall
become effective at the close of business on the date the subdivision or
combination becomes effective.
(f) Adjustment for Reclassification, Exchange and Substitution.
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If, at any time or from time to time after the Original Issue Date, the Priority
Class A Common Shares, Series A Preferred Shares or Partnership Units issuable
upon the exchange of the Series A Preferred Units are changed into the same or a
different number of shares of any class or classes of shares, whether by
recapitalization, reclassification or otherwise (other than a subdivision or
combination of shares or share distribution or a reorganization, merger,
consolidation or sale of assets provided for elsewhere in this Section 5), each
holder of Series A Preferred Units shall have the right thereafter to exchange
such shares into the kind and amount of shares and other securities and property
receivable upon such recapitalization, reclassification or other change by
holders of the maximum number of Priority Class A Common Shares, Series A
Preferred Shares, or Partnership Units as the case may be, for which such Series
A Preferred Units could have been
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exchanged immediately prior to such recapitalization, reclassification or
change, all subject to further adjustment as provided herein or with respect to
such other securities or property by the terms thereof.
(g) Reorganizations, Mergers, Consolidations or Sales of Assets.
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If, at any time or from time to time after the Original Issue Date, there is a
capital reorganization of the Priority Class A Common Shares, Series A Preferred
Shares or Partnership Units (other than a recapitalization, subdivision,
combination, reclassification, exchange or substitution of shares provided for
elsewhere in this Section 5), as a part of such capital reorganization,
provision shall be made so that the holders of the Series A Preferred Units
shall thereafter be entitled to receive upon exchange of the Series A Preferred
Units the number of shares or other securities or property of the General
Partner to which a holder of the number of Priority Class A Common Shares or
Series A Preferred Shares or Partnership Units, as the case may be, deliverable
upon exchange would have been entitled on such capital reorganization, subject
to adjustment in respect of such shares or securities by the terms thereof. In
any such case, appropriate adjustment shall be made in the application of the
provisions of this Section 5 with respect to the rights of the holders of Series
A Preferred Units after the capital reorganization such that the provisions of
this Section 5 (including adjustment of the Common Exchange Price, Series A
Exchange Price or the Partnership Unit Exchange Price, as the case may be, then
in effect and the number of shares issuable upon exchange of the Series A
Preferred Units) shall be applicable after that event and be as nearly
equivalent as practicable.
(h) Sale of Shares of HT Common Shares Below Common Exchange Price.
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(i) If, at any time or from time to time after the Original
Issue Date, the General Partner issues or sells, or is "deemed" by the express
provisions of this Subsection 5(h)(i) to have issued or sold (other than in
connection with an "Antidilution Carve Out Event"), Additional HT Common Shares
(as defined in Subsection 5(h)(iv) below) for an Effective Price (as defined in
Subsection 5(h)(iv) below) that is less than eighty-five percent (85%) of the
then effective Common Exchange Price, then and in each such case, the then
existing Common Exchange Price shall be reduced, as of the opening of business
on the date of such issue or sale, to a price determined by multiplying the
Common Exchange Price by a fraction (i) the numerator of which shall be (A) the
number of HT Common Shares deemed outstanding (as defined in the next sentence)
immediately prior to such issue or sale, plus (B) the number of HT Common Shares
which the aggregate consideration received (as defined in Subsection 5(h)(ii))
by the General Partner for the total number of Additional HT Common Shares so
issued would purchase at such Common Exchange Price, and (ii) the denominator of
which shall be the number of HT Common Shares deemed outstanding (as defined
below) immediately prior to such issue or sale plus the total number of
Additional HT Common Shares actually issued. As used herein, the number of HT
Common Shares "deemed" to be outstanding as of a given date shall be the sum of
(A) the number of HT Common Shares actually outstanding, (B) the number of HT
Common Shares into which the then outstanding Series A Preferred Units could be
exchanged if fully exchanged on the day immediately preceding the given date,
and (C) the number of HT Common Shares which could be obtained through the
exercise or exchange of all other rights, options and convertible securities
outstanding on the day immediately preceding the given date as set forth in
Section 5(h)(ii) below. As used herein, an "Antidilution Carve Out Event" shall
mean a distribution (A) on any class of shares, (B) pursuant to a subdivision or
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combination of HT Common Shares as provided in Section 5(e) above, (C) pursuant
to any employee benefit plan approved by the Board of Trustees of the General
Partner which plans shall call for the issuance, in the aggregate, of no more
than 650,000 HT Common Shares (an "Approved Employee Benefit Plan," (D) pursuant
to a plan providing for the issuance of Additional HT Priority Class A Common
Shares upon reinvestment of dividends and additional optional amounts under such
plan where such dividends or optional payments are reinvested at an amount per
share of HT Common Stock that is equal to or greater than 95% of the fair market
value of such shares (a "DRIP") or (E) upon exchange of partnership interests in
the Partnership pursuant to and in accordance with Section 8.05 of the
Partnership Agreement. To the extent not taken into account pursuant to an
adjustment in accordance with the Articles Supplementary, as defined below, any
changes to the Common Exchange Price hereunder shall automatically, and without
further action by the Partnership or the General Partner, result in a
corresponding change to the Conversion Price set forth in the Articles
Supplementary of the General Partner's Declaration of Trust, which Articles
Supplementary set forth the rights and designations of the Series A Preferred
Shares (the "Articles Supplementary").
(ii) For the purpose of making any adjustment required under
this Section 5(h), the consideration received by the General Partner for any
issue or sale of securities shall (A) to the extent it consists of cash, be
computed at the amount of cash received by the General Partner, after deduction
of any underwriting or similar discount, commission, compensation or concessions
paid or allowed by the Trust in connection with such issue or sale, but without
deduction of any expenses payable by the Trust, (B) to the extent it consists of
property other than cash, be computed at the fair value of that property as
determined in good faith by the Board of Trustees of the General Partner, and
(C) if Additional HT Common Shares, Convertible Securities (as defined in
subsection 5(h)(iii)) or rights or options to purchase either Additional HT
Common Shares or Convertible Securities are issued or sold together with other
stock or securities or other assets of the General Partner for a consideration
which covers both, be computed as the portion of the consideration so received
that may be reasonably determined in good faith by the General Partner's Board
of Trustees to be allocable to such Additional HT Common Shares, Convertible
Securities or rights or options.
(iii) For the purpose of the adjustment required under this
Section 5(h), if the General Partner issues or sells (i) stock or other
securities convertible into Additional HT Common Shares (such convertible stock
or securities being herein referred to as "Convertible Securities") or (ii)
----------------------
rights or options for the purchase of Additional HT Common Shares or Convertible
Securities, and if the Effective Price of such Additional HT Common Shares is
less than eighty-five percent (85%) of the then effective Common Exchange Price,
then in each such case, the General Partner shall be deemed to have issued at
the time of the issuance of such rights or options or Convertible Securities the
maximum number of Additional HT Common Shares issuable upon exercise or exchange
thereof and to have received as consideration for the issuance of such shares an
amount equal to the total amount of the consideration, if any, received by the
General Partner for the issuance of such rights or options or Convertible
Securities, plus, in the case of such rights or options, the minimum amounts of
consideration, if any, payable to the General Partner upon the exercise of such
rights or options, plus, in the case of Convertible Securities, the minimum
amount of consideration, if any, payable to the General Partner (other than by
cancellation of liabilities or obligations evidenced by such Convertible
Securities) upon the exchange thereof;
-11-
provided that if in the case of Convertible Securities the minimum amount of
such consideration cannot be ascertained, but is a function of anti-dilution or
similar protective clauses, the General Partner shall be deemed to have received
the minimum amounts of consideration without reference to such clauses;
provided further that if the minimum amount of consideration payable to the
General Partner upon the exercise or exchange of rights, options or Convertible
Securities is reduced over time or on the occurrence or non-occurrence of
specified events other than by reason of anti-dilution adjustments, the
Effective Price shall be recalculated using the figure to which such minimum
amount of consideration is reduced; and
provided further that if the minimum amount of consideration payable to the
General Partner upon the exercise or exchange of such rights, options or
Convertible Securities is subsequently increased, the Effective Price shall be
again recalculated using the increased minimum amount of consideration payable
to the General Partner upon the exercise or exchange of such rights, options or
Convertible Securities. No further adjustment of the Common Exchange Price, as
adjusted upon the issuance of such rights, options or Convertible Securities,
shall be made as a result of the actual issuance of Additional HT Common Shares
on the exercise of any such rights or options or the exchange of any such
Convertible Securities. If any such rights or options or the exchange privilege
represented by any such Convertible Securities shall expire without having been
exercised, the Common Exchange Price as adjusted upon the issuance of such
rights, options or Convertible Securities shall be readjusted to the Exchange
Price which would have been in effect had an adjustment been made on the basis
that the only Additional HT Common Shares so issued were the Additional HT
Common Shares, if any, actually issued or sold on the exercise of such rights or
options or rights of exchange of such Convertible Securities, and such
Additional HT Common Shares, if any, were issued or sold for the consideration
actually received by the General Partner upon such exercise, plus the
consideration, if any, actually received by the General Partner for the granting
of all such rights or options, whether or not exercised, plus the consideration
received for issuing or selling the Convertible Securities actually converted,
plus the consideration, if any, actually received by the Partnership (other than
by cancellation of liabilities or obligations evidenced by such Convertible
Securities) on the exchange of such Convertible Securities, provided that such
readjustment shall not apply to prior exchanges of Series A Preferred Units.
(iv) "HT Common Shares" shall mean and include the General
------------------
Partner's authorized Priority Class A Common Shares, as constituted on the date
hereof; provided, however, that such term, when used to describe the securities
receivable upon exchange of Series A Preferred Units, shall include only shares
designated as HT Common Shares of the General Partner on the date hereof, any
shares resulting from any combination or subdivision thereof referred to in
Section 5, or in case of any reorganization or reclassification of the
outstanding shares thereof, the stock, securities or assets provided for in
Section 5. "Additional HT Common Shares" shall mean all shares of HT Common
------------------------------
Shares issued by the General Partner or deemed to be issued pursuant to this
Section 5(h), whether or not subsequently reacquired or retired by the General
Partner. The "Effective Price" of Additional HT Common Shares shall mean the
----------------
quotient determined by dividing the aggregate consideration received, or deemed
to have been received by the General Partner for such issuance or sale or deemed
issuance or sale under this Section 5(h), for such Additional HT Common Shares
by the
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total number of Additional HT Common Shares issued or sold, or deemed to have
been issued or sold by the General Partner under this Section 5(h).
(v) If the General Partner proposes to issue or sell
Additional HT Common Shares for an Effective Price that is less than eighty-five
percent (85%) of the Conversion Price and such issuance or sale will result in a
reduction of the Common Exchange Price pursuant to this Section (h) (an "AMEX
Dilutive Issuance"), then the AMEX Dilutive Issuance and the resulting potential
issuance of Additional HT Common Shares upon exchange of Series A Preferred
Units at a Common Exchange Price below the initial Common Exchange Price, must
be approved by the shareholders of the General Partner to the extent required by
the rules of the American Stock Exchange. If such holders do not approve the
AMEX Dilutive Issuance, and the resulting potential issuance of Additional HT
Common Shares upon exchange of Series A Preferred Units at a Common Exchange
Price below the initial Common Exchange Price, as required to be approved by the
preceding sentence, then the General Partner shall not consummate the AMEX
Dilutive Issuance in any manner that would cause a reduction of the Common
Exchange Price pursuant to this Section (h).
(i) Certificate of Adjustment. In each case of an adjustment
-------------------------
or readjustment of the Common Exchange Price or Series A Exchange Price, if the
Series A Preferred Units are then exchangeable pursuant to this Section 5, the
General Partner, at its expense, shall compute such adjustment or readjustment
in accordance with the provisions hereof and prepare a certificate showing such
adjustment or readjustment, and shall mail such certificate, by first class
mail, postage prepaid, to each registered holder of Series A Preferred Units at
such holder's address as shown in the Partnership's books and records. The
certificate shall set forth such adjustment or readjustment, showing in detail
the facts upon which such adjustment or readjustment is based, including a
statement of (i) the consideration received or deemed to be received by the
General Partner for any Additional Shares of Priority Class A Common Shares
issued or sold or deemed to have been issued or sold, (ii) the Common Exchange
Price or Series A Exchange Price, as the case may be, in effect at the time,
(iii) the number of Additional HT Common Shares issued or sold or deemed to have
been issued or sold and (iv) the type and amount, if any, of other property
which at the time would be received upon exchange of the Series A Preferred
Units.
(j) Minimum Adjustment. Notwithstanding anything herein to the
-------------------
contrary, no adjustment of the Common Exchange Price or Series A Exchange Price
shall be made pursuant to this Section 5 in an amount less than $.01 per share,
and any such lesser adjustment shall be carried forward and shall be made at the
time and together with the next subsequent adjustment which together with any
adjustments so carried forward shall amount to $.01 per share or more.
(k) Notices of Record Date. Upon (i) any taking by the General
----------------------
Partner of a record of the holders of any class of securities for the purpose of
determining the holders thereof who are entitled to receive any distribution, or
(ii) any Acquisition (as defined in Section 3) or other capital reorganization
of the General Partner, any reclassification or recapitalization of the capital
stock of the General Partner, any merger or consolidation of the General Partner
with or into any other entity, or any Asset Transfer (as defined in Section 3),
or any voluntary or involuntary dissolution, liquidation or winding up of the
General Partner, the General Partner
-13-
shall mail to each holder of Series A Preferred Units at least ten (10) days
prior to the record date specified therein a notice specifying (A) the date on
which any such record is to be taken for the purpose of such distribution and a
description of such distribution, (B) the date on which any such Acquisition,
reorganization, reclassification, transfer, consolidation, merger, Asset
Transfer, dissolution, liquidation or winding up is expected to become
effective, and (C) the date, if any, that is to be fixed as to when the holders
of record of Priority Class A Common Shares (or other securities) shall be
entitled to exchange their shares of Priority Class A Common Shares (or other
securities) for securities or other property deliverable upon such Acquisition,
reorganization, reclassification, transfer, consolidation, merger, Asset
Transfer, dissolution, liquidation or winding up.
(l) Optional Redemption by the Partnership. At any time, and from
-----------------------------------------
time to time, the Partnership, at the option of the General Partner, may redeem
all or any part of the outstanding Series A Preferred Units (which Units shall
be in an amount not less than 50,000 Units), by giving at least 30 but not more
than 90 days written notice (the "Redemption Notice") to those holders whose
-----------------
Series A Preferred Units the Partnership wishes to redeem of the date on which
such redemption will occur (the "Call Date"), during which period (the
"Redemption Notice Period"), the holders of the Series A Preferred Units who
--------------------------
have received a Redemption Notice may elect to exchange the Series A Preferred
Units covered by the Redemption Notice in accordance with the exchange
provisions set forth in this Section 5. Notice having been mailed as aforesaid,
from and after the Call Date (unless the Partnership shall fail to make
available an amount of cash necessary to effect such redemption), (i) except as
otherwise provided herein, distributions on the Series A Preferred Units so
called for redemption shall cease to accrue, (ii) such Series A Preferred Units
shall no longer be deemed to be outstanding, and (iii) all rights of the holders
thereof as holders of Series A Preferred Units shall cease (except the rights to
exchange and to receive the cash payable upon such redemption, without interest
thereon, upon surrender and endorsement of their certificates if so required and
to receive any dividends payable thereon) as described in clause (iii) below.
The Partnership's obligation to provide cash in accordance with the preceding
sentence shall be deemed fulfilled if, on or before the Call Date, the
Partnership shall deposit, in a segregated account separate from the
Partnership's general assets, with a bank or trust company (which may be an
affiliate of the Partnership) that has an office in the Borough of Manhattan,
City of New York, and that has, or is an affiliate of a bank or trust company
that has, capital and surplus of at least $50,000,000, the cash necessary for
such redemption, in trust, with irrevocable instructions that such cash be
applied to the redemption of the Series A Preferred Units so called for
redemption. No interest shall accrue for the benefit of the holders of Series A
Preferred Units to be redeemed on any cash so set aside by the Partnership.
Subject to applicable escheat laws, any such cash unclaimed at the end of two
years from the Call Date shall revert to the general funds of the Partnership,
after which reversion the holders of such shares so called for redemption shall
look only to the general funds of the Partnership for the payment of such cash.
Promptly after the compliance by the holders of redeemed Series A Preferred
Units with the requirements set forth in the Redemption Notice, such units shall
be exchanged for any cash (without interest thereon) for which such units have
been redeemed. If fewer than all the outstanding Series A Preferred Units are to
be redeemed, units to be redeemed shall be selected by the General Partner from
outstanding Series A Preferred Units not previously called for redemption pro
rata (as nearly as may be), by lot or by any other method determined by the
-14-
General Partner in its sole discretion to be equitable.
(ii) The Redemption Notice shall set forth (A) the number of
Series A Preferred Units to be redeemed, (B) the Call Date, (C) the amount of
the Redemption Price (C) a redemption claim form, and (D) all other relevant
terms. The Redemption Notice shall be mailed by the Partnership, postage
prepaid, to each holder whose Series A Preferred Units are to be redeemed at its
address shown on the records of the Partnership. If the Partnership elects to
redeem any Series A Preferred Units pursuant to this Section 5(l), such election
shall not be revocable by the Partnership and the Partnership shall be obligated
to redeem at the Redemption Price all shares to be redeemed on the Call Date set
forth in the Redemption Notice, as described above.
(iii) The per unit Redemption Price shall be the sum of (A)
the Original Issue Price, (B) all accrued but unpaid distributions thereon
pursuant to Section 2(a) hereof, through and including the Call Date, without
interest, and (C) a premium (the "Premium"), which Premium shall decline on a
-------
straight line basis over a ten (10) year period equal to: $10.50 per Series A
Preferred Unit, with respect to redemptions noticed during the first twelve
month period immediately following the Original Issue Date; $9.45 per Series A
Preferred Unit with respect to redemptions noticed during the second twelve
month period immediately following the Original Issue Date; $8.40 per Series A
Preferred Unit with respect to redemptions noticed during the third twelve month
period immediately following the Original Issue Date; $7.35 per Series A
Preferred Unit with respect to redemptions noticed during the fourth twelve
month period immediately following the Original Issue Date; $6.30 per Series A
Preferred Unit with respect to redemptions noticed during the fifth twelve month
period immediately following the Original Issue Date; $5.25 per Series A
Preferred Unit with respect to redemptions noticed during the sixth twelve month
period immediately following the Original Issue Date; $4.20 per Series A
Preferred Unit with respect to redemptions noticed during the seventh twelve
month period immediately following the Original Issue Date; $3.15 per Series A
Preferred Unit with respect to redemptions noticed during the eighth twelve
month period immediately following the Original Issue Date; $2.10 per Series A
Preferred Unit with respect to redemptions noticed during the ninth twelve month
period immediately following the Original Issue Date; $1.05 per Series A
Preferred Unit with respect to redemptions noticed during the tenth twelve month
period immediately following the Original Issue Date; and, no premium with
respect to redemptions noticed after completion of the tenth twelve month period
immediately following the Original Issue Date. If the Call Date falls after a
distribution payment record date and prior to the corresponding Distribution
Payment Date, then each holder of Series A Preferred Units at the close of
business on such distribution payment record date shall be entitled to the
distribution payable on such Series A Preferred Units on the corresponding
Distribution Payment Date notwithstanding any redemption of such units before
such Distribution Payment Date. Except as provided above, the Partnership shall
make no payment or allowance for unpaid distributions, whether or not in
arrears, on Series A Preferred Units called for redemption.
(m) Fractional Shares. No fractional shares of Priority Class A
-----------------
Common Shares shall be issued upon exchange of Series A Preferred Units. All
shares of Priority Class A Common Shares (including fractions thereof) issuable
upon exchange of more than one Series A Preferred Unit by a holder thereof shall
be aggregated for purposes of determining whether the exchange would result in
the issuance of any fractional share. If, after the aforementioned
-15-
aggregation, the exchange would result in the issuance of any fractional share,
the General Partner shall, in lieu of issuing any fractional shares, pay cash
equal to the product of such fraction multiplied by the Priority Class A Common
Shares' fair market value per share on the date of exchange (as reported by the
securities exchange on which the Priority Class A Common Shares are then listed
for trading, or if none, the most recently reported "over the counter" trade
price, or if none, as determined in good faith by the Board of Trustees of the
General Partner).
(n) Reservation of Shares Issuable Upon Exchange. The General
------------------------------------------------
Partner shall at all times reserve and keep available out of its authorized but
unissued Priority Class A Common Shares and Series A Preferred Shares, solely
for the purpose of effecting the exchange of the Series A Preferred Units, such
number of its Priority Class A Common Shares and Series A Preferred Shares as
shall from time to time be sufficient to effect the exchange of all outstanding
Series A Preferred Units. If at any time the number of authorized but unissued
Priority Class A Common Shares or Series A Preferred Shares shall not be
sufficient to effect the exchange of all then outstanding Series A Preferred
Units, the General Partner shall, prior to exceeding such number of authorized
but unissued shares, take such action as may, in the opinion of its counsel, be
necessary to increase its authorized but unissued Priority Class A Common Shares
or Series A Preferred Shares, as the case may be, to such number as shall be
sufficient for such purpose.
(o) Notices. Any notice required by the provisions of this
-------
Section 5 shall be in writing and shall be deemed effectively given: (i) upon
personal delivery to the party to be notified, (ii) when sent by confirmed telex
or facsimile if sent during normal business hours of the recipient; if not, then
on the next business day, (iii) five (5) days after having been sent by
registered or certified mail, return receipt requested, postage prepaid, or (iv)
one (1) day after deposit with a nationally recognized overnight courier,
specifying next day delivery, with written verification of receipt. All notices
shall be addressed to each holder of record at the address of such holder
appearing on the books of the Partnership.
(p) Payment of Taxes. The General Partner shall pay any and all
------------------
stamp, transfer and other similar taxes payable or determined to be payable in
connection with the issuance of all Priority Class A Common Shares or Series A
Preferred Shares issuable upon exchange of the Series A Preferred Units.
(q) Notwithstanding anything to the contrary above, Series A
Preferred Units shall be convertible into Series A Preferred Shares or Priority
Class A Common Shares in the manner described above provided that delivery to or
ownership of such Series A Preferred Shares or Priority Class A Common Shares,
as applicable, by a holder of Series A Preferred Units (regardless of whether or
not such holder of Series A Preferred Units has, in fact, exercised its Exchange
Rights, and taking into account deemed ownership determined after applying the
provisions of Section 318 of the Code as modified by the provisions of Section
856(d)(5) of the Code), would not result in:
(i) such holder of Series A Preferred Units or any other person owning or
being deemed to own, directly or indirectly (determined after applying the
provisions of Section 318 of the Code, as modified, by the provisions of
Section 856(d)(5) of the Code), Series A Preferred Shares or Priority Class
A Common
-16-
Shares representing an interest in 10% or more of the value of the share of
HT, and
(ii) (A) cause HT to own or be deemed to own, directly or indirectly
(determined after applying the provisions of Section 318 of the Code, as
modified, by the provisions of Section 856(d)(5) of the Code), 10% or more
of the ownership interests in a tenant of HT, HLP, or any other entity in
which either HT or HLP has an equity interest, excluding, for this purpose,
an entity which qualifies as a taxable REIT subsidiary of HT (within the
meaning of Section 856(l) of the Code) ( a "TRS"), or
(B)(1) cause persons owning, or being deemed to own, directly or
indirectly (determined after applying the provisions of Section 318 of the
Code, as modified, by the provisions of Section 856(d)(5) of the Code), 35%
or more of the voting stock or value of the shares of HT to be deemed to
own, directly or indirectly (determined after applying the provisions of
Section 318 of the Code, as modified, by the provisions of Section
856(d)(5) of the Code), 35% or more of (x) the voting stock or total number
of shares of a corporate independent contractor providing services to a
tenant of HT, HLP, or any other entity in which either HT or HLP has an
equity interest or (y) the net assets or profits of a non-corporate
independent contractor providing services to a tenant of HT, HLP, or any
other entity in which either HT or HLP has an equity interest, each within
the meaning of Section 856(d)(3) of the Code (an "Independent Contractor"),
or
(2) cause an Independent Contractor to own or be deemed to own,
directly or indirectly (determined after applying the provisions of Section
318 of the Code, as modified, by the provisions of Section 856(d)(5) of the
Code), 35% or more of the voting stock or value of the shares of HT.
6. Voting Rights.
---------------
(a) General Rights. Holders of Series A Preferred Units shall
---------------
have the right to notice of and to vote, as a single class with holders of
Partnership Units on all matters which holders of Partnership Units have a right
to vote under the terms of the Partnership Agreement or applicable law, or
otherwise, and as a separate class on those matters set forth in Section 6(b)
hereof. On any and all matters as to which the holders of the Series A
Preferred Units and the Partnership Units shall vote as a single class, the
holders of the Series A Preferred Units and Partnership Units shall be entitled
to a number of votes equal to the number of HT Common Shares for which the
Series A Preferred Units or Partnership Units would then be exchangeable
pursuant to the Partnership Agreement.
(b) Separate Class Voting Rights. Notwithstanding the general
-------------------------------
grants of authority to the General Partner pursuant to Section 6.01(a) of the
Partnership Agreement, in addition to any other vote or consent required herein
or by law, the vote or written consent of the holders of at least a majority of
the then outstanding Series A Preferred Units shall be necessary for effecting
the following actions, except for any such action that provides that all holders
of Series A Preferred Units shall as a result of and simultaneously with such
action receive no less
-17-
than the Liquidation Preference, plus the applicable Premium pursuant to Section
5(l)(iii), provided, that the separate voting rights of the holders of Series A
--------
Preferred Units described in clauses (v), (vi), (vii), (x), (xi), (xii) and
(xiii) below, shall only exist at such times as holders of the Series A
Preferred Units hold in the aggregate that number of Series A Preferred Units,
HT Common Shares and any other class or series of HT equity, that represents, on
an as converted/ exchanged basis, at least 5% of the HT Common Shares then
issued and outstanding, on a fully-diluted basis (which shall assume the
conversion and/or exchange of all securities convertible into or exchangeable
for HT Common Shares).
(i) Notwithstanding Section 4.02(a)(i) of the Partnership
Agreement, (A) any authorization or any designation, whether by reclassification
or otherwise, of any new class or series of Partnership Units ranking senior to
the Series A Preferred Units as to payment of distributions, distribution of
assets upon liquidation, dissolution or winding-up (whether voluntary or
involuntary), voting or otherwise; or (B) other than in connection with a
"Voting/Preemptive Rights Carve Out Event," as defined below any issuance of any
class or series of equity interest of the Partnership prior, in the case of the
events set forth in this section 6(i)(B), to the first to occur of (1) the
issuance and sale of an aggregate of 250,000 Series A Preferred Units pursuant
to the terms of the Securities Purchase Agreement or (2) a "SPA Termination",
defined as the termination of the Securities Purchase Agreement pursuant to
Section 7.1 or 7.2 thereof. As used herein, a "Voting/Preemptive Rights Carve
Out Event" shall mean (X) at any time after the consummation of the First
Closing and the Second Closing under the Securities Purchase Agreement, the
issuance of Partnership Units in exchange for a contribution of properties to
the Partnership approved by the Board of Trustees of the General Partner, (Y) at
any time when the Partnership issues Partnership Units in connection with an
Approved Employee Benefit Plan, including issuance of Partnership Units to the
General Partner in connection with the issuance of HT Common Shares under such
plans, which plans may issue, in the aggregate, no more than 650,000 shares of
Priority Class A Common Shares or (Z) the issuance of Partnership Units to the
General Partner in connection with the issuance of HT Common Shares pursuant to
a DRIP.
(ii) During any period when distributions with respect to the
Series A Preferred Units are in arrears, any purchase, redemption or other
acquisition for value (or payment into or setting aside as a sinking fund for
such purpose) of any Junior Units;
(iii) During any period when distributions with respect to
the Series A Preferred Units are in arrears, any action that results in the
declaration or payment of distributions, direct or indirect on account of any
Junior Units;
(iv) Notwithstanding Article XI of the Partnership Agreement,
any action that results in any amendment, alteration, or repeal (by merger or
consolidation or otherwise) of any provisions of this Second Amendment, any
provisions of the Articles Supplementary, the General Partner's Declaration of
Trust, the General Partner's By-laws which eliminates, amends or affects any
term (adversely or otherwise) of the Series A Preferred Shares and/ or the
Priority Class A Common Shares or shares of any series ranking senior to the
Series A Preferred Shares, including, without limitation, the redemption,
dividend, voting, preemptive, antidilution and other powers, rights and
preferences of such shares or adversely affects any holder thereof;
-18-
(v) Notwithstanding Section 6.01(a)(xxi) of the Partnership
Agreement, any action where the Partnership or the General Partner merges with
or into or consolidates with any other entity, but excluding any merger effected
exclusively for the purpose of changing the domicile of the Partnership or the
General Partner;
(vi) Any action where the Partnership or any of its
subsidiaries directly or indirectly sells, leases, transfers, conveys or assigns
(whether in a single transaction or series of related transactions) all or
substantially all of the Partnership's assets, other than transactions involving
leases by the Partnership of its hotel properties in the ordinary course of its
business;
(vii) All transactions involving the Partnership or the
General Partner of the type referred in paragraph (a) of Rule 145 under the
Securities Act of 1933, as amended, and all transactions involving the
Partnership or the General Partner constituting a change-in-control within the
meaning of Rule 14(f) under the Securities Exchange Act of 1934, as amended;
(viii) Any action where the Partnership or the General
Partner or any of its or their material subsidiaries files any voluntary, or
consents to the filing of any involuntary, petition for relief under title 11 of
the United States Code or any successor statute or under any reorganization,
arrangement, insolvency, readjustment of debt, dissolution or liquidation law
with respect to the General Partner, the Partnership or any of its or their
subsidiaries;
(ix) Nothwithstanding Section 6.07 of the Partnership
Agreement, any action where the Partnership, the General Partner or any of its
or their material subsidiaries appoints or consents to, or acquiesces in, the
appointment of a receiver, conservator, trustee or other similar official
charged with the administration, control, management, operation, liquidation,
dissolution or valuation of the Partnership, the General Partner or any of its
or their material subsidiaries, or any of their respective businesses or assets;
(x) Notwithstanding Section 6.07 of the Partnership
Agreement, any action where the Partnership, the General Partner or any of its
or their subsidiaries, or Hersha Hospitality Management, L.P., a Pennsylvania
limited partnership, on the one hand, engages in any transaction with an
affiliate of the Partnership or the General Partner on the other hand, provided,
however, to the extent such transactions are of the type which, but for their
affiliated nature, would fall within the ordinary course of business and
day-to-day affairs of the Partnership, such actions need not be approved on a
transaction-by-transaction basis but may be entered into pursuant to annual
budgets and purchase plans approved by the holders of the Series A Preferred
Units. For purposes of this provision, and this Second Amendment, "affiliate",
---------
and all derivations thereof, shall have the meaning set forth in Rule 12b-2 of
the Exchange Act and shall include, without limitation, for the avoidance of
doubt, (a) the trustees and senior officers of the General Partner, the
Partnership or any of its or their subsidiaries, his or her spouse, parent,
sibling, mother-in-law, father in-law, brother-in-law, sister-in-law, aunt,
uncle, or first cousin, (b) any Person directly or indirectly owning,
controlling or holding the power to vote 5% or more of the outstanding voting
securities of the General Partner, the Partnership or any of its or their
Subsidiaries, and (c) any Person 5% or more of whose outstanding voting
securities are directly or indirectly owned, controlled or held with power to
vote by the General Partner, the Partnership or any of its or their
subsidiaries.
-19-
(xi) Notwithstanding Section 6.01(a)(xi) or Article III of
the Partnership Agreement, for the Partnership, the General Partner or any of
its or their Subsidiaries to engage in any business where either the operation
of such business or ownership of the assets related to such business will result
in the General Partner failing to satisfy the provisions of Section 856 of the
Code;
(xii) Notwithstanding Section 4.02(a)(ii) and the proviso
contained in Section 6.08 of the Partnership Agreement, conducting any business
activities or the ownership of any asset of the General Partner (other than
partnership interests in the Partnership) in each case other than through the
Partnership or one or more Subsidiary Partnerships as contemplated by Section
6.08 of the Partnership Agreement;
(xiii) Admission of a substitute or additional General
Partner;
(xiv) Any agreement to do any of the transactions set forth
in this Section.
7. Preemptive Rights.
Each of the holders of the Series A Preferred Units shall have the
following preemptive rights:
(a) Sale. At all times commencing on the Original Issue Date and
----
terminating three years thereafter, before the Partnership offers to any party
(a "Sale") any class or series of Partnership Units, or any obligation or
----
instrument convertible into or exchangeable for Partnership Units (the "Offered
-------
Securities"), other than in connection with the issuance of Partnership Units
----------
pursuant to a "Voting/Preemptive Rights Carve Out Event," the Partnership shall
provide written notice at least fifteen (15) days in advance of the consummation
of such Sale (the "Offer Notice") to each holder of Series A Preferred Units.
------------
With respect to convertible or exchangeable Partnership Units, the holders of
Series A Preferred Units shall have no rights under this section in connection
with the conversion or exchange of such securities, provided, that the
Partnership has complied with the provisions of this section with respect to the
issuance of such convertible or exchangeable securities.
(b) Offer. The Offer Notice shall be irrevocable and shall
-----
constitute an offer by the Partnership to sell to each holder of Series A
Preferred Units at the per share sale price which the Partnership would receive
upon consummation of such proposed Sale (the "Sales Price") up to such number of
-----------
Offered Securities (or such number of additional securities of the same class as
would have an equivalent effect) equal to the percentage which (i) the total
number of shares of Priority Class A Common Shares for which such holders'
Partnership Units are exchangeable plus the number of shares of Priority Class A
Common Shares into which such holders' equity interest in the General Partner
are convertible plus the number of Priority Class A Common Shares such holder
then holds, bears to (ii) the total number of shares of Priority Class A Common
Shares for which or into which any outstanding equity securities of the General
Partner or the Partnership are exchangeable or convertible plus the total number
of Priority Class A Common Shares then issued and outstanding (the "Pro Rata
--------
Share").
-----
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(c) Response Period. Each holder of the Series A Preferred Units
----------------
shall have a period of fifteen (15) days after receipt of the Offer Notice in
which to elect to purchase up to its Pro Rata Share of the Offered Securities at
the Sales Price, such election to be made by such holder by written notice (the
"Acceptance Notice"). Each Acceptance Notice shall also specify the maximum
------------------
amount of additional Offered Securities which such holder desires to purchase in
the event any other holder fails to elect to purchase all of its Pro Rata Share
of Offered Securities pursuant to the immediately preceding sentence on a timely
basis or elects in writing not to do so (such unpurchased Offered Securities are
hereinafter referred to as the "Remaining Securities"). In the event that there
--------------------
are Remaining Securities available for purchase, each holder of the Series A
Preferred Units having specified in its Acceptance Notice a desire to purchase
such remaining Securities shall purchase such Remaining Securities on a pro rata
basis (up to the amount of Remaining Securities specified by such holder in its
Acceptance Notice), or in such other proportions as such holder may all agree,
on the terms set forth herein.
(d) Closing and Payment. The closing of the sale and delivery of
--------------------
the Offered Securities purchased hereunder by any such holder of the Series A
Preferred Units, and payment therefor (which shall be made by wire transfer in
immediately available funds to an account designated by the Partnership), shall
be at a time and place designated by the Partnership on the tenth (10th) day
following the Partnership's receipt of such holder's Acceptance Notice or such
later date agreed to by holders of a majority of the participating holders of
Series A Preferred Units. The closing of any sale of Offered Securities to the
participating holders of Series A Preferred Units shall be conditioned on the
closing of the initial proposed Sale.
8. Tax Procedures. While any Series A Preferred Units are outstanding,
--------------
the General Partner shall (i) maintain the controls and procedures designed to
ensure REIT compliance as set forth in Section 3.19 of the Securities Purchase
Agreement, and (ii) within a reasonable period of time prior to consummation of
any acquisition, disposition or other extraordinary corporate transaction,
deliver to holders of the Series A Preferred Units, any summary of the material
terms and an analysis of the federal and state tax implications of such
transaction delivered to any member of the General Partner's Board of Directors.
9. No Waiver. Except as otherwise modified or provided for herein, the
---------
holders of Series A Preferred Units shall also be entitled to, and shall not be
deemed to have waived, any other applicable rights granted to such holders under
applicable law.
10. No Impairment. The General Partner shall not, by amendment of its
--------------
Declaration of Trust, the Partnership Agreement or this Second Amendment,
through any reorganization, transfer of assets, merger, dissolution, issue or
sale of securities or any other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms to be observed or performed
hereunder by the General Partner or the Partnership, but will at all times in
good faith, assist in the carrying out of all the provisions of this Second
Amendment and in the taking of all such action as may be necessary or
appropriate in order to protect the rights and preferences granted hereunder to
the holders of the Series A Preferred Units against impairment, which rights
include without limitation, the exchange rights and liquidation preferences
contained herein.
11. Admission of Limited Partner; Exhibits to Partnership.
-----------------------------------------------------------
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CHP is hereby admitted to the Partnership as a Partner on the terms and
conditions set forth herein. Exhibit A to the Partnership Agreement is hereby
amended to reflect the issuance of the Series A Preferred Units provided for
herein.
12. Redemption Right of Partnership Units.
-----------------------------------------
Section 8.05(c) of the Partnership Agreement is hereby amended by
inserting the following new clause (v) and renumbering the existing clause "(v)"
as clause "(vi)": "(v) cause any person who operates Property on behalf of a
"taxable REIT subsidiary" of the Company, as defined in Section 856(l) of the
Code, which Property is a "qualified lodging facility" within the meaning of
Section 856(d)(9)(D) of the Code that is leased to such taxable REIT subsidiary,
to fail to qualify as an "eligible independent contractor" within the meaning of
Section 856(d)(9)(A) of the Code with respect to such taxable REIT subsidiary,".
13. Construction; Reaffirmation.
----------------------------
In the event of any conflict between the provisions of this Second
Amendment and the Partnership Agreement, the provisions of this Second Amendment
shall govern. The provisions of Section 6.04(b) of the Partnership Agreement
shall not be construed to limit the rights and preferences of the holders of
Series A Preferred Units under the Partnership Agreement and this Second
Amendment. Except as modified herein, all terms and conditions of the
Partnership Agreement shall remain in full force and effect, which terms and
conditions the General Partner hereby ratifies and affirms.
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IN WITNESS WHEREOF, this Second Amendment has been executed as of the date
first above written.
GENERAL PARTNER: HERSHA HOSPITALITY TRUST
By: /s/ Xxxxxx X. Xxxxxx
Name: Xxxxxx X. Xxxxxx
Title: Chief Financial Officer
SERIES A PREFERRED
LIMITED PARTNER: CNL HOSPITALITY PARTNERS, L.P.
By: CNL HOSPITALITY GP CORP.,
its general partner
By: /s/ Xxxxxx X. Xxxxxxx
Name: Xxxxxx X. Xxxxxxx
Title: Senior Vice President
(SIGNATURE PAGE TO SECOND AMENDMENT AGREEMENT OF LIMITED PARTNERSHIP OF HERSHA
HOSPITALITY LIMITED PARTNERSHIP)
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