LIMITED PARTNERSHIP AGREEMENT
OF
HT/CNL METRO HOTELS, L.P.
BY AND BETWEEN
CNL HOSPITALITY PARTNERS, L.P.
AND
HERSHA HOSPITALITY LIMITED PARTNERSHIP
DATED: AS OF APRIL 21, 2003
TABLE OF CONTENTS
ARTICLE 1 FORMATION AND CONTINUATION . . . . . . . . . . . . . . . . . . 1
Section 1.1 Organization . . . . . . . . . . . . . . . . . . . . . 1
Section 1.2 Agreement; Effect of Inconsistencies with Act . . 1
Section 1.3 Name . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 1.4 Effective Date. . . . . . . . . . . . . . . . . . . . 2
Section 1.5 Term . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 1.6 Certificate of Limited Partnership. . . . . . . . . 2
Section 1.7 Registered Agent and Office . . . . . . . . . . . . 2
Section 1.8 Principal Place of Business . . . . . . . . . . . . 2
Section 1.9 Foreign Qualifications. . . . . . . . . . . . . . . . 3
Section 1.10 Partner's Qualifications . . . . . . . . . . . . . . 3
ARTICLE 2 DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Section 2.1 General Interpretive Principles. . . . . . . . . . . 3
Section 2.2 Defined Terms . . . . . . . . . . . . . . . . . . . . 3
ARTICLE 3 BUSINESS, PURPOSES AND POWERS . . . . . . . . . . . . . . . . 11
Section 3.1 Business and Purpose . . . . . . . . . . . . . . . . 11
Section 3.2 Powers . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 3.3 Limitations on Scope of Business . . . . . . . . . 13
Section 3.4 Proposed Acquisitions; The Investment Committee. . 13
ARTICLE 4 PARTNERS, CAPITAL CONTRIBUTIONS AND FINANCING. . . . . . . . 14
Section 4.1 Identity of Partners and Percentage Interests . . 14
Section 4.2 Initial Capital Contributions. . . . . . . . . . . . 14
Section 4.3 Additional Contributions After Initial Capital
Contributions. . . . . . . . . . . . . . . . . . . . . 15
Section 4.4 Capital Accounts. . . . . . . . . . . . . . . . . . . 16
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Section 4.5 Return of Capital Contributions . . . . . . . . . . 17
Section 4.6 No Third Party Beneficiary Rights. . . . . . . . . 17
ARTICLE 5 ALLOCATIONS AND DISTRIBUTIONS. . . . . . . . . . . . . . . . . 17
Section 5.1 Distributions. . . . . . . . . . . . . . . . . . . . . 17
Section 5.2 Determination of Profits and Losses. . . . . . . . 18
Section 5.3 General Allocation Rules . . . . . . . . . . . . . . 19
Section 5.4 Income Tax Elections . . . . . . . . . . . . . . . . 20
Section 5.5 Income Tax Allocations . . . . . . . . . . . . . . . 20
Section 5.6 Transfers During Fiscal Year. . . . . . . . . . . . 21
Section 5.7 [Intentionally Omitted] . . . . . . . . . . . . . . . 21
Section 5.8 Special Allocations to Comply with Section 704
Regulations. . . . . . . . . . . . . . . . . . . . . . 21
Section 5.9 Taxation as a Partnership . . . . . . . . . . . . . 24
Section 5.10 Assignees Treated as Partners . . . . . . . . . . . 24
Section 5.11 Tax Matters Partner. . . . . . . . . . . . . . . . . 24
ARTICLE 6 RIGHTS AND DUTIES OF PARTNERS. . . . . . . . . . . . . . . . 25
Section 6.1 Management . . . . . . . . . . . . . . . . . . . . . . 25
Section 6.2 Liability of Partners. . . . . . . . . . . . . . . . 25
Section 6.3 Indemnification. . . . . . . . . . . . . . . . . . . . 26
Section 6.4 Major Decisions . . . . . . . . . . . . . . . . . . . 26
Section 6.5 Intentionally Omitted.. . . . . . . . . . . . . . . . 28
Section 6.6 Signing of Documents . . . . . . . . . . . . . . . . 28
Section 6.7 Right to Rely on Authority of General Partner . 28
Section 6.8 Outside Activities. . . . . . . . . . . . . . . . . . 29
Section 6.9 Limitations on Powers of Partners. . . . . . . . . 29
Section 6.10 Prohibition Against Partition; Distribution in Kind 29
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Section 6.11 Budgets. . . . . . . . . . . . . . . . . . . . . . . . 29
ARTICLE 7 BOOKS OF ACCOUNT AND REPORTS; ACCESS TO RECORDS . . . . . 30
Section 7.1 Books and Records. . . . . . . . . . . . . . . . . . 30
Section 7.2 Banking. . . . . . . . . . . . . . . . . . . . . . . . 30
Section 7.3 Reports to Partners. . . . . . . . . . . . . . . . . 31
Section 7.4 Accountants. . . . . . . . . . . . . . . . . . . . . . 31
Section 7.5 Interim Tax Information. . . . . . . . . . . . . . . 31
ARTICLE 8 TRANSFERS OF PARTNERSHIP INTERESTS AND ECONOMIC RIGHTS. . . 31
Section 8.1 Partner's or Assignee's Right to Transfer . . . . 31
Section 8.2 Conditions of Transfer . . . . . . . . . . . . . . . 31
Section 8.3 Partners' Rights of First Offer and First Refusal 32
Section 8.4 Creation of Lien and Security Interest. . . . . . 34
Section 8.5 Non-Complying Transfers Void . . . . . . . . . . . . 34
ARTICLE 9 ADMISSION OF ASSIGNEES . . . . . . . . . . . . . . . . . . . . 34
Section 9.1 Rights of Assignees. . . . . . . . . . . . . . . . . 34
Section 9.2 Admission of Assignee as a Partner. . . . . . . . 34
Section 9.3 Admission of Permitted Transferee as Partner. . . 34
ARTICLE 10 DEFAULT AND REMEDIES. . . . . . . . . . . . . . . . . . . . . 35
Section 10.1 Events of Default. . . . . . . . . . . . . . . . . . 35
Section 10.2 Remedies upon the Occurrence of an Event of Default. 36
ARTICLE 11 BUY-SELL. . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Section 11.1 Initiation of Procedure. . . . . . . . . . . . . . . 38
Section 11.2 Response.. . . . . . . . . . . . . . . . . . . . . . . 40
Section 11.3 Closing. . . . . . . . . . . . . . . . . . . . . . . . 40
ARTICLE 12 SALE OF PROPERTY. . . . . . . . . . . . . . . . . . . . . . . 41
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Section 12.1 Partner's Right to Make Proposed Offer or to Obtain
Third Party Offer. . . . . . . . . . . . . . . . . . . 41
Section 12.2 Responding Partner's Option to Purchase. . . . . . 41
Section 12.3 Sale of Property . . . . . . . . . . . . . . . . . . 42
Section 12.4 Exceptions . . . . . . . . . . . . . . . . . . . . . . 43
Section 12.5 Third Party Offer. . . . . . . . . . . . . . . . . . 43
Section 12.6 Cash Price. . . . . . . . . . . . . . . . . . . . . . 44
Section 12.7 Termination of Property Management Agreement . . . 44
Section 12.8 Three Year Condition . . . . . . . . . . . . . . . . 44
ARTICLE 13 SPECIAL RIGHTS OF LIMITED PARTNER UNITS. . . . . . . . . . 44
Section 13.0 Exchangeability. . . . . . . . . . . . . . . . . . . . 44
Section 13.1. Mechanics. . . . . . . . . . . . . . . . . . . . . . . 44
Section 13.2 Determination of Fair Market Value . . . . . . . . 47
Section 13.3 Payment of Note/Sale of Property . . . . . . . . . 54
Section 13.4 Release from Liability . . . . . . . . . . . . . . . 55
ARTICLE 14 CONFIDENTIALITY . . . . . . . . . . . . . . . . . . . . . . . . 54
Section 14.1 55
Section 14.2 56
Section 14.3 56
ARTICLE 15 DISSOLUTION OF COMPANY. . . . . . . . . . . . . . . . . . . . 57
Section 15.1 Events Causing Dissolution . . . . . . . . . . . . . 57
Section 15.2 Winding Up. . . . . . . . . . . . . . . . . . . . . . 57
Section 15.3 Application of Assets in Winding Up . . . . . . . 57
Section 15.4 Negative Capital Accounts. . . . . . . . . . . . . . 58
Section 15.5 Termination. . . . . . . . . . . . . . . . . . . . . . 59
ARTICLE 16 MISCELLANEOUS PROVISIONS . . . . . . . . . . . . . . . . . . . 59
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Section 16.1 Amendment and Modification . . . . . . . . . . . . . 59
Section 16.2 Parties in Interest. . . . . . . . . . . . . . . . . 59
Section 16.3 Notices. . . . . . . . . . . . . . . . . . . . . . . . 59
Section 16.4 Counterparts . . . . . . . . . . . . . . . . . . . . . 60
Section 16.5 Entire Agreement. . . . . . . . . . . . . . . . . . . 60
Section 16.6 Governing Law; Choice of Forum . . . . . . . . . . 61
Section 16.7 Public Announcements. . . . . . . . . . . . . . . . . 61
Section 16.8 Headings . . . . . . . . . . . . . . . . . . . . . . . 61
Section 16.9 Articles, Sections. . . . . . . . . . . . . . . . . . 61
Section 16.10 Binding Effect. . . . . . . . . . . . . . . . . . . . 61
Section 16.11 Jury Trial Waiver. . . . . . . . . . . . . . . . . . 61
Section 16.12 Incorporation of Recitals. . . . . . . . . . . . . . 62
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LIMITED PARTNERSHIP AGREEMENT
THIS LIMITED PARTNERSHIP AGREEMENT (this "Agreement") is made and entered into
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as of April 21, 2003 (the "Effective Date"), by and among CNL Hospitality
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Partners, L.P., a Delaware limited partnership (hereinafter sometimes referred
to as "CHP", or the "Limited Partner", and Hersha Hospitality Limited
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Partnership, a limited partnership organized under the laws of the Commonwealth
of Virginia (hereinafter sometimes referred to as "HLP" or the "General
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Partner"). The General Partner and Limited Partner are hereinafter referred to
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collectively as the "Partners".
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RECITALS
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A. The parties hereto formed a Delaware limited partnership known as
HT/CNL Metro Hotels, L.P. (the "Company") for purposes of acquiring from time to
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time, through wholly owned subsidiary entities, real estate properties.
B Pursuant to this Agreement, during the one year period commencing on the
Effective Date, it is the desire of the Partners that all real estate
acquisition and development opportunities that are known to the General Partner
and/or HHMLP meeting certain criteria be referred, on an exclusive basis, to the
Company for consideration by its Investment Committee (as defined herein).
C. The parties hereto further desire to enter into this Agreement to provide
for the harmonious management of the Company.
NOW, THEREFORE, in consideration of the mutual promises, covenants and
agreements herein contained, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Partners agree as
follows:
ARTICLE 1
FORMATION AND CONTINUATION
SECTION 1.1 ORGANIZATION. The Company was organized as a Delaware limited
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partnership pursuant to the Act (as herein defined).
SECTION 1.2 AGREEMENT; EFFECT OF INCONSISTENCIES WITH ACT. The Partners
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agree to the terms and conditions of this Agreement, as it may from time to time
be amended, supplemented or restated according to its terms. The Partners
intend that this Agreement shall be the sole source of the agreement among the
parties with respect to the Subsidiaries and the Properties (as herein defined),
and, except to the extent a provision of this Agreement expressly incorporates
federal income tax rules by reference to sections of the Code or Regulations (as
herein defined) or is expressly prohibited or ineffective under the Act, this
Agreement shall govern, even when inconsistent with, or different than, the
provisions of the Act or any other law. To the extent any provision of this
Agreement is prohibited or ineffective under the Act, this Agreement shall be
considered amended to the smallest degree possible in order to make such
provision effective under the Act. If the Act is subsequently amended or
interpreted in such a way as to validate a provision of this Agreement that was
formerly invalid, such provision shall be considered to be
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valid from the effective date of such interpretation or amendment. Each Partner
shall be entitled to rely on the provisions of this Agreement, and no Partner
shall be liable to the Company or to any other Partner for any action or refusal
to act taken in good faith reliance on this Agreement. The Partners and the
Company agree that the duties and obligations imposed on the Partners as such
shall be those set forth in this Agreement, which is intended to govern the
relationship among the Company and the Partners, notwithstanding any provision
of the Act or common law to the contrary.
SECTION 1.3 NAME. The name of the Company shall be "HT/CNL Metro Hotels,
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L.P.", and such name shall be used at all times in connection with the conduct
of the Company's business.
SECTION 1.4 EFFECTIVE DATE. This Agreement shall become effective as of
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the Effective Date.
SECTION 1.5 TERM. The Company shall have perpetual existence and shall
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continue until the Company is dissolved and its affairs wound up in accordance
with this Agreement and the Act.
SECTION 1.6 CERTIFICATE OF LIMITED PARTNERSHIP. On February 25, 2003, a
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certificate of limited partnership for the Company was filed with the Secretary
of State of the State of Delaware pursuant to the Act. The General Partner
shall take all other actions deemed by it to be necessary or appropriate from
time to time to comply with all applicable requirements for the operation and,
when appropriate, termination of the Company as a limited partnership under the
Act.
SECTION 1.7 REGISTERED AGENT AND OFFICE. The Company's registered agent for
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service of process and registered office in the State of Delaware shall be that
Person and location reflected in the Certificate. The General Partner may, from
time to time, change the registered agent or office through appropriate filings
with the Secretary of State. If the registered agent ceases to act as such for
any reason or the registered office shall change, the General Partner shall
promptly designate a replacement registered agent or file a notice of change of
address, as the case may be.
SECTION 1.8 PRINCIPAL PLACE OF BUSINESS. The Company's principal place of
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business shall be located at c/o Hersha Hospitality Limited Partnership, 000
Xxxxxxxx Xxxxx, Xxx X, Xxx Xxxxxxxxxx, Xxxxxxxxxxxx 00000. The General Partner
may change the location of the Company's principal place of business to anywhere
within the United States from time to time. The General Partner shall make
those filings and take those other actions required by applicable law in
connection with the change and shall give notice to all Partners of the new
location of the Company's principal place of business promptly after the change
becomes effective.
SECTION 1.9 FOREIGN QUALIFICATIONS. The Company shall qualify to do
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business as a foreign limited partnership in each jurisdiction in which the
nature of its business requires such qualification. The General Partner may
select any Person permitted by applicable law to act as registered agent for the
Company in each jurisdiction in which it is qualified to do business, and may
replace any such Person from time to time.
Section 1.10 Partner's Qualifications. Each Partner shall maintain its
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respective existence and good standing under the laws of its state of
incorporation or formation, and its qualification to do business in such
jurisdictions where such qualifications are required.
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ARTICLE 2
DEFINITIONS
SECTION 2.1 GENERAL INTERPRETIVE PRINCIPLES. For purposes of this
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Agreement, except as otherwise expressly provided or unless the context
otherwise requires, (i) the terms defined in this Article shall have the
meanings assigned to them in this Article and include the plural as well as the
singular, and the use of any gender herein shall be deemed to include the other
genders; (ii) accounting terms not otherwise defined herein have the meanings
assigned to them in accordance with GAAP (as defined herein); (iii) references
in this Agreement to "Articles," "Sections," "subsections," "paragraphs" and
other subdivisions without reference to a document are to designated Articles,
Sections, subsections, paragraphs and other subdivisions of this Agreement; (iv)
a reference to a subsection without further reference to a Section is a
reference to such subsection as contained in the same Section in which the
reference appears, and this rule shall also apply to paragraphs and other
subdivisions; (v) the words "hereto," "herein," "hereof," "hereunder" and other
words of similar import refer to this Agreement as a whole and not to any
particular provision; (vi) the word "including" means "including, but not
limited to"; (vii) the words "not including" mean "excluding only"; (viii) the
headings in this Agreement are for convenience only and are not intended to
describe, interpret, define, or limit the scope, extent, or intent of any of the
provisions of this Agreement; and (ix) all Schedules and Exhibits to this
Agreement are incorporated herein by this reference thereto as if fully set
forth herein, and all references herein to this Agreement shall be deemed to
include all such incorporated Schedules and Exhibits.
SECTION 2.2 DEFINED TERMS. As used in this Agreement, the following terms
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shall have the following respective meanings (unless otherwise expressly
provided herein):
ACT: The Delaware Revised Uniform Limited Partnership Act in its
present form or as amended from time to time.
ACQUISITION PROFILE: Such investment criteria, characteristics and
parameters for an investment in real estate as agreed to by the Partners and set
forth in detail on Exhibit A attached hereto, which shall include, without
limitation, market conditions, asset size, franchise brand, asset value and
desired investment returns, all of which shall be considered by the members of
the Investment Committee in connection with their deliberation as to whether to
recommend for consideration a Proposed Transaction to the Partners.
ADDITIONAL CAPITAL CONTRIBUTIONS: The additional Capital
Contributions required to be made by the Partners pursuant to Section 4.3
including the Capital Contribution made by a Nondefaulting Partner for a
Defaulting Partner pursuant to Section 10.2.
ADJUSTED BASIS: The basis for determining gain or loss for federal
income tax purposes from the sale or other disposition of property, as defined
in Section 1011 of the Code.
ADMINISTRATION FEE: A cumulative quarterly administration fee payable
to the General Partner equal to 8.75 basis points (.0875%) of the aggregate cost
of the Properties at a fiscal quarter end during the term of this Agreement.
3
AFFILIATE: and all derivations thereof, shall have the meaning set
forth in Rule 12b-2 of the Securities Exchange Act of 1934, as amended, and the
rules thereunder and shall include, without limitation, for the avoidance of
doubt, (a) the officers, directors or trustees of the Company, any Subsidiary,
or any Partner, (b) any Person directly or indirectly owning, controlling or
holding the power to vote 5% or more of the outstanding voting securities of the
Company, any Subsidiary, or any Partner, 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 Company, any Subsidiary or any Partner.
AGREEMENT: This Limited Partnership Agreement in its present form or
as amended, supplemented or restated from time to time.
APPROVED ACQUISITION: Any proposed Acquisition of a Property which
has been approved by the Investment Committee and by the Partners.
ASSIGNEE: A Person to whom a Partnership Interest is Transferred and
who is not admitted as a Partner.
BUSINESS DAY: Any day other than a Saturday, a Sunday or a day on
which national banks in New York City, New York are not open for business or are
authorized by law to close.
CAPITAL ACCOUNT: The capital account of a Partner maintained in
accordance with Section 4.4.
CAPITAL CONTRIBUTION: Any money or property from time to time
contributed by a Partner to the Company, including Additional Capital
Contributions.
CAPITAL PROCEEDS: The cash proceeds received by the Company from a
Capital Transaction (excluding the proceeds of business interruption insurance)
which are not used by the Company to pay for the costs and expenses incurred in
connection with the Capital Transaction, including, in the case of casualty or
condemnation, the costs and expenses of collecting any insurance proceeds or the
condemnation award, as the case may be. Capital Proceeds shall include all
payments of principal of, and interest on, any promissory note or other
obligation received by the Company in connection with a Capital Transaction and
shall be increased by any reduction of reserves previously established out of
Capital Proceeds.
CAPITAL TRANSACTION: A transaction in which the Company (i) borrows
money,(ii) sells, exchanges or otherwise disposes of all or any part of its or a
Subsidiary's property, including a sale or other disposition pursuant to a
condemnation, or (iii) receives the proceeds of property damage insurance, or
any other transaction that, in accordance with GAAP, is considered capital in
nature.
CARRYING VALUE: Carrying Value means, with respect to any asset, the
Adjusted Basis of the asset, except as follows:
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(i) the initial Carrying Value of an asset contributed by a
Partner to the Company after the Effective Date shall be the gross fair
market value of the asset, as agreed to by the Partners at the time the
asset is contributed;
(ii) the Carrying Values of the Company's and the
Subsidiaries' assets shall be adjusted to equal their respective gross fair
market values, as reasonably determined by the Partners, as of the
following times: (a) the acquisition of an additional interest in the
Company by any new or existing Assignee or Partner in exchange for more
than a de minimis Capital Contribution; (b) the distribution by the Company
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to a Partner or an Assignee of more than a de minimis amount of property as
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consideration for all or part of a Partnership Interest or an Assignee's
Economic Rights; and (c) the liquidation of the Company within the meaning
of Regulations Section 1.704-1(b)(2)(ii)(g); but adjustments pursuant to
clauses (a) and (b) above shall be made only if the Partners reasonably
determine that such adjustments are necessary or appropriate to reflect the
relative economic interests of the Partners in the Company;
(iii) the Carrying Value of an asset of the Company
distributed to a Partner shall be adjusted to equal the gross fair market
value of the asset on the date of distribution as reasonably determined by
the Partners; and
(iv) the Carrying Values of the Company's and the
Subsidiaries' assets shall be increased (or decreased) to reflect any
adjustments to the Adjusted Basis of those assets pursuant to Sections
734(b) or 743(b) of the Code, but only to the extent that those adjustments
are taken into account in determining Capital Accounts pursuant to
Regulations Section 1.704-l(b)(2)(iv)(m) and Section 5.2(g); but the
Carrying Values shall not be adjusted pursuant to this clause (iv) to the
extent the Partners reasonably determine that an adjustment pursuant to
clause (ii) above is necessary or appropriate in connection with a
transaction that would otherwise result in an adjustment pursuant to this
clause (iv).
If the Carrying Value of an asset is determined or adjusted pursuant to clauses
(i), (ii) or (iv), such Carrying Value shall thereafter be adjusted by the
Depreciation taken into account with respect to the asset for purposes of
computing Profit and Loss.
CERTIFICATE: The Certificate of Limited Partnership of the Company
filed with the Secretary of State of the State of Delaware, as amended from time
to time in accordance with the Act.
CLASS A COMMON SHARES: The authorized shares of Priority Class A
Common Shares of HT, par value $.01 per share.
CODE: The Internal Revenue Code of 1986, as in effect and hereafter
amended.
COMPANY: The limited partnership formed pursuant to this Agreement,
and any successor limited partnership which continues the business of the
Company, and is a reformation or reconstitution of the Company.
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COMPANY LOAN: Any obligation for borrowed money, and any bonds,
debentures, notes or other evidences of indebtedness that constitute an
obligation and indebtedness of the Company.
DEFAULTING PARTNER: A Partner or Partners with respect to which an
Event of Default has occurred and is continuing.
DEPRECIATION: For each Fiscal Year, an amount equal to the
depreciation, amortization or other cost recovery deduction allowable with
respect to an asset for such Fiscal Year, except that if the Carrying Value of
an asset differs from its Adjusted Basis on the Effective Date or at the
beginning of a subsequent Fiscal Year, Depreciation shall be determined in a
manner permitted by the Regulations promulgated under Section 704(c). To the
extent consistent with such Regulations, Depreciation shall be an amount which
bears the same ratio to the beginning Carrying Value as the federal income tax
depreciation, amortization or other cost recovery deduction for the Fiscal Year
(or part thereof) bears to such beginning Adjusted Basis.
DISCRETIONARY CAPITAL shall mean an amount up to $10 million that was
contributed by CHP to HLP in consideration for HLP partnership units (pursuant
to the terms of the Securities Purchase Agreement) and which is used pursuant to
the Securities Purchase Agreement by HLP for discretionary purposes unrelated to
transactions contemplated by this Agreement.
DISTRIBUTION: A transfer of property (including cash) by the Company
to a Partner or an Assignee on account of a Unit pursuant to Section 5.1 or
Section 15.3.
ECONOMIC RIGHTS: With respect to an Assignee, the Assignee's rights
to receive allocations of Profits and Losses and Distributions.
EMERGENCY COSTS: Costs and expenses required to (a) correct a
condition that if not corrected would endanger imminently the preservation or
safety of a Property or the Properties or the safety of tenants, guests or other
persons lawfully on or using a Property, (b) avoid the imminent suspension of
any necessary service in or to a Property, or (c) prevent any of the Partners or
any Subsidiary from being subjected imminently to criminal or substantial civil
penalties or damages.
EVENT OF DEFAULT: As defined in Section 10.1.
FISCAL QUARTER: Each calendar quarter in each Fiscal Year.
FISCAL YEAR: The calendar year.
GAAP: United States generally accepted accounting principles
consistently applied from accounting period to accounting period and within each
such accounting period.
GENERAL PARTNER: HLP, or any successor general partner appointed
pursuant to Section 6.1.
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GENERAL PARTNER PREFERRED DISTRIBUTION: A cumulative per annum (but
not compounded) return on the Unreturned Capital Contributions attributable to
each General Partner Unit equal to thirteen percent (13%) for the period during
the term of this Agreement
GENERAL PARTNER UNITS: A Partnership Interest of the General Partner
representing the Partnership Interests of the General Partner and includes all
benefits to which the General Partner is entitled, as provided in this
Agreement, together with all obligations of the General Partner to comply with
the terms and provisions of this Agreement.
HT: shall mean Hersha Hospitality Trust, a Maryland real estate
investment trust and General Partner of HLP.
INITIAL CAPITAL CONTRIBUTIONS: The Capital Contributions made by the
Partners pursuant to Section 4.2.
INSTITUTIONAL LENDER: A commercial or savings bank, savings and loan
association, public or privately-held fund engaged in real estate or corporate
lending, pension fund, insurance company, endowment fund or trust, real estate
investment trust, government agency, or quasi-governmental agency, such as a
board, bureau, authority or department of any federal, state or local
government, any corporation established by or for the benefit of any federal,
state or local governmental agency or authority, any asset manager or investment
advisor acting on behalf of any such entity, or any entity composed of one or
more of the foregoing.
LIMITED PARTNER OR LIMITED PARTNER: As defined in the Preamble.
LOSS: As defined in Section 5.2.
LIMITED PARTNER PREFERRED DISTRIBUTION: A cumulative per annum (but
not compounded) return on the Unreturned Capital Contributions attributable to
each Limited Partner Unit equal to ten and one-half percent (10.5%) for the
period during the term of this Agreement.
LIMITED PARTNER UNITS: A Partnership Interest of the Limited Partner
representing the Partnership Interests of the Limited Partner and includes all
benefits to which the Limited Partner may be entitled, as provided in this
Agreement, together with all obligations of such Limited Partner to comply with
the terms and provisions of this Agreement, which benefits and obligations shall
include, without limitation, those certain benefits set forth in Article 13
hereof.
MATURITY: With respect to any Company Loan, the maturity date of such
Company Loan as set forth in the documents evidencing such Company Loan,
including for this purpose the maturity date or accelerated maturity date, if
applicable, that results by virtue of an acceleration of the maturity date of a
Company Loan pursuant to the terms of the documents evidencing such
indebtedness.
MORTGAGE: Any mortgage, deed of trust, or similar security document.
NECESSARY EXPENDITURES: (a) all Emergency Costs, and (b) all other
expenditures whether or not of a recurring nature that are necessary for the
Company, or any Subsidiary to
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preserve, operate, maintain, improve or protect the Property consistent with any
approved Subsidiary Budget, including payment of any amounts due under any
Property Management Agreement, insurance payments, real estate tax payments,
utility costs, repair and maintenance costs, costs of compliance with federal,
state and local laws, codes, rules or regulations, and any other operating
expenses or capital expenses set forth in each Subsidiary Budget or otherwise
approved by the Partners and including payment of the principal balance of a
Company Loan upon its Maturity, but excluding payment of the principal balance
of a Company Loan prior to its Maturity, unless such payment has been approved
in writing by the Limited Partner in accordance with Section 6.4.
NET CASH FLOW: For any specified period, an amount equal to the sum
of (i) all cash revenues received by the Company during such period from any
source (including distributions from Subsidiaries and proceeds of business
interruption insurance, but excluding funds received as Capital Contributions or
Capital Proceeds), and (ii) amounts set aside as reserves during earlier periods
where, and to the extent, such reserves are determined by the General Partner to
be no longer reasonably necessary in the efficient conduct of the Company's or
any Subsidiary's business or otherwise required by the Property Management
Agreements reduced by the sum of (w) cash expenditures by the Company during
such period for real estate taxes, management fees and other costs and expenses
in connection with the normal conduct of the Company's business (excluding the
Administration Fee), (x) all payments by the Company during such period of
principal of and interest on loans and other obligations of the Company for
borrowed money, including loans made by a Partner to the Company, (y) all cash
expenditures by the Company during such period for the acquisition of property,
for construction period interest and taxes and for loan fees, whether or not
capitalized, and for capital improvements and/or replacements, and (z) such
reserves as established for working capital, maintenance, repairs, replacements,
capital improvements, contingent or unforeseen liabilities or obligations and to
meet anticipated expenses during such period as are reasonably necessary in the
efficient conduct of the Company's business, or are required by the Property
Management Agreements, but only to the extent the payments and expenditures
described in clauses (w), (x) and (y) are not made from funds received as
Capital Contributions or Capital Proceeds or from cash reserves of the Company
which were established during, and deducted in determining Net Cash Flow for,
any earlier period and the reserves described in clause (z) are not established
from funds received as Capital Contributions or Capital Proceeds.
NET CASH FLOW PROJECTION: An annual report prepared by the General
Partner and approved by the Limited Partner, based on existing Subsidiary
Budgets, and anticipated cash flows approved by the Partners for any upcoming
fiscal year, which shall set forth a net cash flow projection.
NONDEFAULTING PARTNER: Any Partner other than a Defaulting Partner.
NONRECOURSE DEDUCTIONS: As defined in Regulations Section
1.704-2(b)(1).
ORIGINAL ISSUE PRICE: The amount of $100.00 per Partnership Unit.
PARTNERS: The Limited Partner and the General Partner.
8
PARTNERSHIP INTEREST: With respect to a Partner, the Partner's entire
ownership interest in the Company, including all of the Partner's rights and
obligations hereunder including, without limitation, its Economic Rights, voting
rights and the obligation to comply with the terms and provisions of this
Agreement. A Partnership Interest may be expressed as a number of Partnership
Units and all references to Partnership Interests shall include the Partnership
Units evidencing such Partnership Interest.
PARTNERSHIP UNIT: A fractional, undivided share of the Partnership
Interests of the Company. The number of Partnership Units outstanding and the
Percentage Interests in the Company represented by such Partnership Units are
set forth on Schedule 4.1(b), as such Schedule may be amended from time to time.
The ownership of Partnership Units shall be evidenced by a form of
non-negotiable certificate that the Partners may approve from time to time.
PERCENTAGE INTEREST: The percentage interest from time to time of
each Partner in the Company, determined by dividing the number of Partnership
Units owned by the Partner in question by the total number of Partnership Units
outstanding, as such percentage interest is adjusted from time to time pursuant
to any provision of this Agreement that provides for such adjustment.
PERMITTED TRANSFEREE: Any person controlling or controlled by the
Partner, which, for purposes of this definition, means the ownership of voting
securities of the Partner or Subsidiary entity in question in an amount in
excess of 50% of all such voting securities which are issued and outstanding.
PERSON: An individual, corporation, trust, association,
unincorporated association, estate, partnership, joint venture, limited
partnership, limited liability company or other legal entity, including a
governmental entity.
PREFERRED DISTRIBUTION: With respect to any period, the sum of the
General Partner Preferred Distribution for such period and the Limited Partner
Preferred Distribution for such period.
PROFIT: shall have the meaning set forth in Section 5.2.
PROPERTY OR PROPERTIES: shall mean those certain real estate assets
acquired from time to time by the Subsidiaries and/or the Company as set forth
on Exhibit B, as amended.
PROPERTY ACQUISITION CONTRIBUTIONS: shall have the meaning set forth
in Section 4.3(c).
PROPERTY MANAGEMENT AGREEMENT: A management agreement by and between
the Property Manager, and the Company in a form approved by the Partners
pursuant to this Agreement.
PROPERTY MANAGER: Hersha Hospitality Management L.P., a Pennsylvania
limited partnership ("HHMLP"), or any other Property Manager selected by the
Partners pursuant to this Agreement.
9
PROPOSED ACQUISITION: Any and all real estate acquisition and
development opportunities which the General Partner and HHMLP may learn of from
time to time during the one year period commencing on the Effective Date that
are within the business purpose of the Company and/or any Subsidiary, as set
forth in Section 3.1(a).
REGULATIONS: The permanent and temporary regulations, and all
amendments, modifications and supplements thereof, from time to time promulgated
by the Secretary of the Treasury under the Code.
SECRETARY OF STATE: The Secretary of State of the State of Delaware.
SECURITIES PURCHASE AGREEMENT: That certain Securities Purchase
Agreement by and among CHP, HT and HLP, dated April 21, 2003.
SUBSIDIARY: A bankruptcy remote single purpose entity that is wholly
owned by the Company which may take the form of a limited partnership, limited
liability company or other form of entity as determined by the Partners.
SUBSIDIARY BUDGET: As defined in Section 6.11 hereof.
TRANSFER AND TRANSFERRED: A sale, assignment, transfer or other
disposition (voluntarily or by operation of law) of, or the granting or creating
of a lien, encumbrance or security interest in, a Partnership Interest.
UNRETURNED CAPITAL CONTRIBUTIONS: shall mean the Capital
Contributions of a Partner, less, in the case a holder of Limited Partner Units,
previous distributions of Capital Proceeds made to it pursuant to Sections
12.3(b)(i) and 15.3(c)(i) or otherwise and in the case of a holder of General
Partner Units, previous distributions made of Capital Proceeds to it pursuant to
Sections 12.3(b)(ii) and 15.3(c)(ii) or otherwise.
ARTICLE 3
BUSINESS, PURPOSES AND POWERS
SECTION 3.1 BUSINESS AND PURPOSE. The sole business and purpose of the
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Company shall be, and shall be limited to (i) owning Properties through the
Subsidiaries, (ii) owning, holding and disposing of ownership interests (as a
partner or member, as applicable) in the Subsidiaries and (iii) carrying on all
activities reasonably related thereto (but shall not include the acquisition of
additional property or other material assets not related to the ownership and
management of ownership interests in the Subsidiaries).
(a) The business and purpose of each Subsidiary shall:
(i) subject to the provisions of Section 3.4 below, be to
acquire, own, hold, develop, construct, lease, operate, manage, maintain,
mortgage, improve, repair, encumber, finance, refinance, sell, redevelop,
rehabilitate, improve and otherwise deal with and dispose of, directly or
indirectly the Properties; and
10
(ii) be to conduct all activities reasonably necessary or
desirable to accomplish the foregoing purposes and to do anything necessary or
incidental to any of the foregoing, which in each case, is not a breach of this
Agreement;
(b) Subject to the provisions of Section 3.4, the Company shall
form a wholly owned Subsidiary to be the record owner of each Property (or
interests therein) for purposes of conducting the Company's business. The
provisions contained in each such Subsidiary's organic and constituent documents
and instruments shall be pursuant to terms agreed to by the Partners. Unless
otherwise agreed to by the General Partner and the Limited Partner, a Subsidiary
may only be formed in connection with an Approved Acquisition.
(c) During the one year period commencing on the Effective Date,
the General Partner and HHMLP (i) shall, on an exclusive basis, present all
Proposed Acquisitions to the Company and the Investment Committee in accordance
with Section 3.4, and (ii) shall not take any action related to any Proposed
Acquisition, unless such Proposed Acquisition is not recommended by the
Investment Committee to the Partners, or consummation of such Proposed
Acquisition is not approved by the Partners. Such exclusivity shall not apply
to the Limited Partner, it being the intent of the Partners that the Limited
Partner is under no obligation to refer such opportunities to the Company and
may pursue such opportunities directly, subject to Article 14.
----------
(d) Neither the Company nor a Subsidiary may engage in any other
business or activity without the approval of the Partners.
SECTION 3.2 POWERS. Except as otherwise provided in this Section 3.2, the
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Company shall have all powers of a limited partnership under the Act and the
power to do all things necessary or convenient to operate its business and
accomplish its purposes as described in Section 3.1, including the following:
(a) to hold, operate, manage and exercise rights with respect to
all property owned by the Company, including the ownership interest in the
Subsidiaries;
(b) to sell, transfer, assign, convey, lease, encumber or
otherwise dispose of or deal with all or any part of the property of the
Company;
(c) to incur expenses and to enter into and carry out contracts,
agreements and guaranties necessary to accomplish the business and purposes of
the Company;
(d) to raise and provide such funds as may be necessary to further
the business and purposes of the Company and to borrow money, incur liabilities
and issue promissory notes and other evidences of indebtedness, and to secure
the same by security interest or other lien on all or any part of the property
of the Company;
(e) to employ or retain, on behalf of the Company, such Persons as
the Partners deem advisable in the operation and management of the business of
the Company, including such accountants, attorneys and consultants as the
General Partner deems appropriate, on such reasonable terms and at such
reasonable compensation as the Partners shall determine;
11
(f) to collect, receive and deposit all sums due or to become due
to the Company;
(g) to hire and appoint agents and employees of the Company, to
define their duties and to establish their compensation;
(h) to pay any and all taxes, charges and assessments that may be
levied, assessed or imposed upon any property of the Company;
(i) to demand, xxx for, collect, recover and receive all goods,
claims, debts, moneys, interest and demands whatsoever now due or that may
hereafter become due or belong to the Company, including the right to institute
any action, suit, or other legal proceedings for the recovery of any property,
or any part or parts thereof, to the possession of which the Company may be
entitled, and to make, execute and deliver receipts, releases and other
discharges therefore under seal or otherwise;
(j) to make, execute, endorse, accept, collect and deliver any and
all bills of exchange, checks, drafts and notes of the Company;
(k) to defend, settle, adjust, compound, submit to arbitration and
compromise all actions, suits, accounts, reckonings, claims and demands
whatsoever that now are or hereafter shall be pending between the Company and
any Person (other than disputes between or among Partners), at law or in equity,
in such manner and in all respects as the Partners shall deem fit;
(l) to secure and maintain insurance against liability and
property damage with respect to the activities of the Company;
(m) to cause the Subsidiaries to take any of the actions described
in Section 3.2(a) through Section 3.2(l), inclusive; and
(n) to do and perform all acts and things necessary, appropriate,
proper, advisable, incidental to, or convenient for, the furtherance and
accomplishment of the business and purposes of the Company and the Subsidiaries
set forth in Section 3.1.
SECTION 3.3 LIMITATIONS ON SCOPE OF BUSINESS. Except for the authority
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expressly granted to the General Partner in this Agreement, no Partner,
attorney-in-fact, employee or other agent of the Company shall have any
authority to bind or act for the Company or any other Partner in the carrying on
of their respective businesses or activities.
SECTION 3.4 PROPOSEDACQUISITIONS; THE INVESTMENT COMMITTEE (a) The
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Partners shall form an Investment Committee, the sole purpose of which shall be
to determine, based upon information and data compiled by the General Partner,
HHMLP, the Limited Partner or any other Person, whether a Proposed Acquisition
falls within the Acquisition Profile. In connection with such determination, the
Investment Committee shall, review any and all budgets, lease terms, market
studies, acquisition and operational pro forma data, franchise agreements,
property leases, budgets, environmental studies, title reports, financing
agreements and any other relevant financial, operational or other similar data
relating to the Proposed Acquisition that has been provided to the Investment
Committee. At the end of such review, the Investment Committee
12
shall prepare a report indicating whether based upon its review, the Proposed
Acquisition falls within the parameters of the Acquisition Profile. In the event
such Proposed Acquisition does fall within such parameters, the Investment
Committee shall make a recommendation to the Partners that, subject to approval
by all of the Partners, the Company should consider consummating the Proposed
Acquisition. Upon such Partner approval and consummation of the Proposed
Acquisition, the General Partner and the Property Manager shall use their
reasonable best efforts to operate such property for the account of the
Subsidiary within the parameters of the Subsidiary Budget, pursuant to Section
6.11 hereof.
(b) The Investment Committee shall be comprised of six (6)
members, three (3) of whom shall be appointed by the Limited Partner and three
(3) of whom shall be appointed by the General Partner. Each of the Limited
Partner and the General Partner may designate in writing one or more alternate
members to act in the absence of any one of its representatives. Each Partner
may, by written notice to the others, remove any member or alternate member of
the Investment Committee appointed by such Partner and appoint a substitute
therefor; provided, however, that any new member or alternate member appointed
to the Investment Committee by any Partner must either be a partner, member,
officer, director or employee of such Partner or of an Affiliate of such Partner
or be approved by the Investment Committee members appointed by the other
Partner, such approval not to be unreasonably withheld. The members of the
Investment Committee and the alternate members appointed by the Limited Partner
and the General Partner shall be as set forth on Schedule 3.4 hereof, which
Schedule is subject to change from time to time.
(c) A majority (in number) of the members of the Investment
Committee shall constitute a quorum for voting at any meeting of the Investment
Committee, provided that if less than a majority of such number of members of
the Investment Committee are present at said meeting, a majority of the members
of the Investment Committee present at such meeting may adjourn the meeting at
any time without further notice. The affirmative vote of a majority (in number)
of the members of the Investment Committee present at a meeting at which a
quorum is present shall be the act of the Investment Committee; provided at
--------
least one member of the Investment Committee appointed by the Limited Partner
and at least one member of the Investment Committee appointed by the General
---
Partner shall have consented to such action.
(d) Notice of any meeting of the Investment Committee shall be
given no fewer than two (2) Business Days and no more than twenty (20) Business
Days prior to the date of the meeting. Notice of any meeting of the Investment
Committee shall specify the date, time and place of the proposed meeting and the
agenda for the meeting (unless such notice is waived in writing). Notice shall
be delivered in the manner set forth in Section 16.3 hereof. The attendance of
a member of the Investment Committee at a meeting of the Investment Committee
shall constitute a waiver of notice of such meeting, except where a member of
the Investment Committee attends a meeting for the express purpose of objecting
to the transaction of any business because the meeting is not properly called or
convened.
(e) No member of the Investment Committee shall be entitled to
receive any salary or other remuneration or expense reimbursement from the
Company or any Subsidiary for his services as a member of the Investment
Committee.
13
(f) Any one or more members of the Investment Committee may
participate in a meeting of the Investment Committee by means of a conference
telephone or similar communications equipment allowing all persons participating
in the meeting to hear each other at the same time. Participation by such means
shall constitute presence in person at a meeting.
ARTICLE 4
PARTNERS, CAPITAL CONTRIBUTIONS AND FINANCING
SECTION 4.1 IDENTITY OF PARTNERS AND PERCENTAGE INTERESTS.
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(a) Partners. The initial Partners of the Company shall be the
General Partner and the Limited Partner.
(b) Percentage Interests. The initial Percentage Interests of the
Partners shall be as set forth on Schedule 4.1(b).
SECTION 4.2 INITIAL CAPITAL CONTRIBUTIONS. In proportion to their relative
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Percentage Interests, the General Partner and Limited Partner have each received
credits to their Capital Accounts as of the date hereof in the agreed and
stipulated amounts set forth on Schedule 4.1(b) reflecting each Partner's
Initial Capital Contribution.
SECTION 4.3 ADDITIONAL CONTRIBUTIONS AFTER INITIAL CAPITAL CONTRIBUTIONS.
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(a) PARTNERS' OBLIGATIONS TO MAKE ADDITIONAL CAPITAL
CONTRIBUTIONS. Notwithstanding anything to the contrary contained herein, the
Limited Partner shall have no obligation under this Section 4.3 on and after the
earlier of (x) such time as the Limited Partner shall have made aggregate
Capital Contributions, which when added to the product obtained by multiplying
the Discretionary Capital, if any, by two, equals or exceeds $40.0 million, or
(y) the first anniversary of the Effective Date. Notwithstanding anything to the
contrary contained herein, the General Partner shall have no obligation under
this Section 4.3 on and after the earlier of (x) such time as the General
Partner shall have made aggregate Capital Contributions equal to or in excess of
$20.0 million, (y) the first anniversary of the Effective Date, or (z) with
respect to HLP, such time as HLP ceases to be the General Partner, provided that
HLP shall not then be in breach of this Agreement. From time to time after the
full amount of the Initial Capital Contributions required by Section 4.2 has
been paid to the Company, the Partners shall be required to make Additional
Capital Contributions to fund (A) Necessary Expenditures (including payment of
the principal balance of a Company Loan upon its Maturity, but excluding payment
of the principal balance of a Company Loan prior to its Maturity, and (B)
Property Acquisition Contributions (as herein defined) to the Company, as they
are requested pursuant to Section 4.3(b) hereof. The Partners shall contribute
such required Additional Capital Contributions (pursuant to a capital call by
the General Partner pursuant to this Section 4.3) to the capital of the Company,
in cash or current funds, pro rata, in proportion to their Percentage Interests.
All such Additional Capital Contributions shall be made by the General Partner
and Limited Partner pro-rata, in proportion to their respective Percentage
Interests.
14
(b) PROCEDURE FOR ADDITIONAL CAPITAL CONTRIBUTIONS . If at any
time or from time to time Additional Capital Contributions are required (as
determined pursuant to Section 4.3(a) or (c)) the General Partner shall deliver
to each Partner a written notice requesting such Additional Capital
Contributions (a "Capital Call Notice"). The Capital Call Notice shall specify
the date (the "Due Date") on or before which such funds are required by the
Company, which shall be at least (i) two (2) Business Days after receipt of the
Capital Call Notice, for Necessary Expenditures and (ii) fifteen (15) Business
Days after receipt of the Capital Call Notice for Property Acquisition
Contributions, unless a shorter time is reasonably designated by the General
Partner, but in no event less than ten (10) days after receipt of the Capital
Call Notice. The Capital Call Notice shall specify whether the funds are
required with respect to Necessary Expenditures or Property Acquisition
Contributions. Each Partner shall, on or before the Due Date, pay to the
Company in cash or current funds such Partner's proportionate share of the
amount specified in the Capital Call Notice in accordance with its Percentage
Interest against issuance of Partnership Units on the basis of one Partnership
Unit for each $100.00 (Original Issue Price) of capital contributed by a
Partner. For purposes of Section 10.1(a), a Partner shall be in default if the
Partner does not make the payment required by the Capital Call Notice by the Due
Date, provided, that HLP shall not be deemed to be in default if such failure
was the direct and proximate result of CHP's failure to consummate the purchase
of securities under the Securities Purchase Agreement.
(c) PROPERTY ACQUISITION CONTRIBUTIONS: In the event funds are
required (collectively, "Property Acquisition Contributions") (i) to negotiate
for and/or close an Approved Acquisition (including third-party closing cost) or
to fund any deposits required to be made pursuant to any letter of intent or any
purchase and sale agreement in connection with an Approved Acquisition, (ii) to
pay all third-party costs associated with any negotiations, legal advice, due
diligence, analysis or other evaluations of Properties incurred in connection
with an Approved Acquisition, (iii) to pay all costs, expenses and other funds
required by the Company (whether operating or capital in nature) in connection
with startup operations of any Properties or in connection with the formation or
startup of any Subsidiary in connection with an Approved Acquisition, (iv) to
pay all costs and expenses in connection with the redevelopment of any Property
as approved by the Partners in connection with an Approved Acquisition, or (v)
to fund any reasonable working capital needs of the Company or any Subsidiary,
then and in any such case, the General Partner shall deliver to each Partner, a
Capital Call Notice, setting forth the amount and purpose of the requested
Property Acquisition Contributions, in accordance with Sections 4.3(b) hereof.
(d) PARTNER'S OBLIGATIONS SEVERAL AND NOT JOINT. The obligations
of the Partners to make Additional Capital Contributions pursuant to this
Section 4.3 are several and not joint.
SECTION 4.4 CAPITAL ACCOUNTS.
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(a) The Company shall establish and maintain a Capital Account for
each Partner in accordance with the provisions of Section 704(b) of the Code and
the Regulations thereunder.
15
(b) Each Partner's Capital Account shall be maintained in
accordance with the following provisions:
(i) Each Partner's Capital Account shall be credited with the
amounts of such Partner's Capital Contributions, such Partner's
distributive share of Profits and any items in the nature of income or gain
which are specially allocated to the Partner pursuant to Article 5, and the
amount of any liabilities of the Company assumed by such Partner or which
are secured by any property distributed by the Company to such Partner;
(ii) Each Partner's Capital Account shall be charged with the
amounts of cash and the Carrying Value of any property distributed by the
Company to such Partner pursuant to any provision of this Agreement, such
Partner's distributive share of Losses and any items in the nature of
expenses or losses which are specially allocated to the Partner pursuant to
Article 5;
(iii) If all or a portion of a Partner's Partnership Interest
is Transferred in accordance with the terms of this Agreement, the
transferee shall succeed to the Capital Account of the transferor to the
extent it relates to the Transferred Units; and
(iv) In determining the amount of any liability for purposes
of this Section 4.4(b) Section 752(c) of the Code and any other applicable
provisions of the Code and Regulations shall be taken into account.
This Section 4.4(b) and other provisions of this Agreement relating to the
maintenance of Capital Accounts are intended to comply with Regulations Section
1.704-1(b), and shall be interpreted and applied in a manner consistent with
such Regulations. If the General Partner, with the advice of the Company's
independent certified public accountants or legal counsel, reasonably determines
that it is prudent to modify the manner in which the Capital Accounts, or any
charges or credits thereto (including charges or credits relating to liabilities
which are secured by contributions or distributed property or which are assumed
by the Company or by Partners), are computed in order to comply with such
Regulations, the General Partner may make such modification, but only if it is
not likely to have a material effect on the amounts to be distributed to any
Partner pursuant to Section 5.1 or pursuant to Section 15.3 upon the dissolution
of the Company. The General Partner, with the approval of the Limited Partner,
also shall make any adjustments that may be necessary or appropriate to maintain
equality between the Capital Accounts of the Partners and the amount of capital
reflected on the Company's balance sheet, as computed for book purposes, in
accordance with Regulations Section 1.704-1(b)(2)(iv)(q).
SECTION 4.5 RETURN OF CAPITAL CONTRIBUTIONS. No Partner or Assignee shall
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be entitled to demand the return of the Partner's or Assignee's Capital Account
or Capital Contribution at any particular time, except upon dissolution of the
Company. No Partner or Assignee shall be entitled at any time to demand or
receive property other than cash. Unless otherwise provided by law, no Partner
or Assignee shall be personally liable for the return or repayment of all or any
part of any other Partner's or Assignee's Capital Account or Capital
Contribution, it being expressly agreed that any such return of capital pursuant
to this Agreement shall be made solely from the assets (which shall not include
any right of contribution from a Partner or Assignee) of the Company.
16
SECTION 4.6 NO THIRD PARTY BENEFICIARY RIGHTS. The provisions of this
----------- ----------------------------------
Article 4 are not intended to be for the benefit of any creditor or any other
Person (other than a Partner in its, his or her capacity as such) to whom any
debts, liabilities or obligations are owed by (or who otherwise has any claim
against) the Company or any of the Partners; and no such creditor or other
Person shall obtain any right under any of such provisions or shall by reason of
any of such provisions make any claim in respect of any debt, liability or
obligation (or otherwise) against the Company nor any of the Partners. Nothing
in this Section shall impair or affect any security or pledge agreement granted
to a lender by the Subsidiaries or the Company.
ARTICLE 5
ALLOCATIONS AND DISTRIBUTIONS
SECTION 5.1 DISTRIBUTIONS.
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(a) NET CASH FLOW.
(i) The General Partner shall distribute Net Cash Flow among
the Partners, quarterly within fifteen (15) days after the end of each
Fiscal Quarter, in accordance with the following order of priority:
(A) first, Net Cash Flow shall be distributed to the
holders of Limited Partner Units, until the Limited Partner Preferred
Distributions that are payable to the holders of the Limited Partner Units
have been paid in full;
(B) second, subject to Section 5.1 (a)(ii), Net Cash
Flow shall be distributed to the General Partner until the Administration
Fee that is payable to the General Partner has been paid in full;
(C) third, subject to Section 5.1 (a)(ii), Net Cash Flow
shall be distributed to the holders of General Partner Units, until the
General Partner Preferred Distributions that are payable to the holder of
the General Partner Units have been paid in full;
(D) thereafter, any remaining Net Cash Flow shall be
distributed to the Partners in proportion to their Percentage Interests.
(ii) The Administration Fee and the General Partner Preferred
Distribution shall be distributed to the General Partner if the Net Cash
Flow Projection applicable for such Fiscal Year and other actual financial
data for such Fiscal Year existing at the time of the intended distribution
provides that the Company will have sufficient Net Cash Flow to pay to the
holders of the Limited Partner Units the Limited Partner Preferred
Distributions in full for such Fiscal Year. If the Administration Fee and
the General Partner Preferred Distribution is not paid in the current
Fiscal Quarter pursuant to the previous sentence, the Administration Fee
and the General Partner Preferred Distribution will pursuant to its terms
accrue and become payable only when, at such time of intended payment, all
cumulative accrued and undistributed Limited Partner Preferred
Distributions have been paid in full. If the Administration Fee or the
General
17
Partner Preferred Distribution is paid during a Fiscal Year when, at the
end of such Fiscal Year, the Limited Partner Preferred Distributions have
not been paid in full, the General Partner shall pay to the holders of the
Limited Partner Units, to the extent the General Partner has received the
Administration Fee and/or the General Partner Preferred Distribution,
respectively, within fifteen (15) days after the end of a Fiscal Year, an
amount sufficient to satisfy in full the unpaid Limited Partner Preferred
Distributions payable to the holders of the Limited Partner Units. To the
extent the General Partner is required to pay any monies to the holders of
the Limited Partner Units pursuant to the previous sentence of this Section
5.1(a)(ii), such payment shall be treated for purposes of Section 4.4 and
this Article 5 as though the General Partner contributed such amount to the
Company, and such amount was immediately thereafter distributed to the
Limited Partner pursuant to Section 5.1(a)(1)(A).
SECTION 5.2 DETERMINATION OF PROFITS AND LOSSES. For purposes of this
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Agreement, the profit ("Profit") or loss ("Loss") of the Company for each Fiscal
Year shall be the net income or net loss of the Company for such Fiscal Year as
determined for Federal income tax purposes, but computed with the following
adjustments:
(a) without regard to any adjustment to basis pursuant to Section
743 of the Code (except as provided in Section 5.2(g));
(b) by including the net gain (after expenses) or net loss (after
expenses) realized or incurred by the Company in a Capital Transaction
determined on the basis of the Carrying Value of the Property which is the
subject of the sale or other disposition;
(c) by taking into account items of deduction attributable to any
Property of the Company based upon the Carrying Value of the Property;
(d) by including as an item of gross income any tax-exempt income
received by the Company;
(e) by treating as a deductible expense any expenditure of the
Company described in Section 705(a)(2)(B) of the Code;
(f) in the event the Carrying Value of a Property is adjusted
pursuant to clauses (ii) or (iii) of the definition thereof, the amount of such
adjustment shall be taken into account as gain or loss from the disposition of
such Property for purposes of computing Profit or Loss; and
(g) to the extent an adjustment to the Adjusted Basis of any asset
of the Company pursuant to Sections 734(b) or 743(b) of the Code is required by
Regulations Section 1.704-1(b)(2)(iv)(m)(4) to be taken into account in
determining Capital Accounts as a result of a distribution other than in
complete liquidation of a Partner's Partnership Interest, the amount of such
adjustment shall be treated as an item of gain (if the adjustment increases the
Adjusted Basis of the asset) or loss (if the adjustment decreases the Adjusted
Basis of the asset) from the disposition of the asset and shall be taken into
account for purposes of computing Profit or Loss.
SECTION 5.3 GENERAL ALLOCATION RULES.
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18
(a) PROFITS. Subject to Section 5.3(c), after giving effect to
the special allocations set forth in Section 5.8, all Profit of the Company for
each Fiscal Year or part thereof shall be allocated to the Partners in the
following order of priority (for purposes of applying this Section 5.3, a
Partner's Capital Account balance shall be deemed to be increased by such
Partner's share of (i) the allocation for such Fiscal Year pursuant to Sections
5.8(g) and 5.8(h) and (ii) any Partnership Minimum Gain and Partner Nonrecourse
Debt Minimum Gain remaining after such allocation as determined under the
Regulations under Code Section 704(b)):
(i) First, to the Partners, in the same ratio and reverse
order as Losses were allocated to such Partners pursuant to the provisions
of Section 5.3(b) below for all prior fiscal years;
(ii) Second, to the Limited Partners, pro rata until the
aggregate Profit allocated pursuant to this Section 5.3(a)(ii) for such
Fiscal Year and all prior Fiscal Years is equal to the aggregate amount (if
any) of Net Cash Flow distributed during such Fiscal Year and all prior
Fiscal Years on account of their Preferred Distributions as determined
pursuant to Section 5.1(a)(i)(A);
(iii) Third, to the General Partner until the aggregate
Profit allocated pursuant to this Section 5.3(a)(iii) for such Fiscal Year
and all prior Fiscal Years, is equal to the sum of the net aggregate
amounts (if any) of Net Cash Flow distributed during such Fiscal Year and
all prior Fiscal Years on account of its receipt of the Administration Fee
in its capacity as General Partner and its Preferred Distribution as
determined pursuant to Section 5.1(a)(i)(B) and (C) (taking into account
any amounts recontributed by the General Partner pursuant to the provisions
of Section 5.1(a)(ii);
(iv) Thereafter, any remaining Profits shall be allocated
among the Partners in proportion to their Percentage Interests.
(b) LOSSES. Subject to Section 5.3(c), after giving effect to the
special allocations set forth in Section 5.8, all Loss of the Company for each
Fiscal Year or part thereof shall be allocated to the Partners in the following
order of priority (for purposes of applying this Section 5.3, a Partner's
Capital Account balance shall be deemed to be increased by such Partner's share
of (i) the allocation for such Fiscal Year pursuant to Sections 5.8(g) and
5.8(h) and (ii) any Partnership Minimum Gain and Partner Nonrecourse Debt
Minimum Gain remaining after such allocation as determined under the Regulations
under Code Section 704(b)):
(i) First, to the General Partner until the General Partner's
Capital Account balance is negative in an amount equal to the sum of (A)
the amount it is deemed required to contribute pursuant to the penultimate
sentences of Treasury Regulations Sections 1.704-2(g)(1) and 1.704-2(i)(5),
if any, and (B) the amounts described in Treasury Regulations Section
1.704-1(b)(2)(ii)(d)(4), (5) or (6).
- - - -
(ii) Second, to the Limited Partner until the Limited
Partner's Capital Account balance is negative in an amount equal to the sum
of (A) the amount it is deemed required to contribute pursuant to the
penultimate sentences of Treasury
19
Regulations Sections 1.704-2(g)(1) and 1.704-2(i)(5), if any, and (B) the
amounts described in Treasury Regulations Section 1.704-1(b)(2)(ii)(d)(4),
- -
(5) or (6).; and
- -
(iii) Thereafter, to the General Partner.
SECTION 5.4 INCOME TAX ELECTIONSIn the event of a Transfer of all or part of
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a Partnership Interest (or of the interest of a partner or member in a
partnership or limited liability company which is a Partner), the General
Partner may (but shall not be obligated to) make the election described in
Section 754 of the Code.
SECTION 5.5 INCOME TAX ALLOCATIONSFor purposes of Sections 702 and 704 of
----------- ----------------------
the Code, or the corresponding sections of any future Federal internal revenue
law, or any similar tax law of any state or other jurisdiction, the Company's
profits, gains and losses for Federal income tax purposes, and each item of
income, gain, loss or deduction entering into the computation thereof, shall be
allocated among the Partners, to the extent possible, in the same proportions as
the corresponding "book" items are allocated pursuant to Section 5.3.
(a) If any portion of the Profit from a Capital Transaction
allocated among the Partners pursuant to Section 5.5(a) is characterized as
ordinary income under the recapture provisions of the Code, each Partner's
distributive share of taxable gain from the sale of the property that gave rise
to such Profit (to the extent possible) shall include a proportionate share of
the recapture income equal to that Partner's share of prior cumulative
depreciation deductions with respect to the property that give rise to the
recapture income. In no event, however, shall any Partner be allocated ordinary
income hereunder in excess of the amount of gain allocated to the Partner under
this Agreement. Any ordinary income that is not allocated to a Partner due to
the gain limitation described in the previous sentence shall be allocated among
those Partners whose shares of total gain on the sale, exchange or other
disposition of the property exceed their respective shares of depreciation from
those Company assets being disposed of, in proportion to their relative shares
of the total allocable gain.
SECTION 5.6 TRANSFERS DURING FISCAL YEARIn the event of the Transfer of all
----------- ----------------------------
or any part of a Partnership Interest (in accordance with the provisions of this
Agreement) at any time other than the end of a Fiscal Year, the share of Profit
or Loss and items of income, gain, loss and expense (in respect of the
Partnership Interest so Transferred) shall be allocated between the transferor
and the transferee in the same ratio as the number of days in the Fiscal Year
before and after such Transfer. This Section shall not apply to Profit or Loss
from Capital Transactions or to other extraordinary nonrecurring items. Profit
and Loss from Capital Transactions shall be allocated on the basis of the
Partners' Percentage Interests on the date of closing of the sale and
extraordinary or nonrecurring items of gain or loss shall be allocated on the
basis of the Partners' Percentage Interests on the date the gain is realized or
the loss incurred, as the case may be. If during any Fiscal Year the Percentage
Interests of the Partners are adjusted pursuant to any provision of this
Agreement that provides for such adjustment, the share of Profit or Loss of the
Company for such Fiscal Year which is to be allocated among the Partners in
proportion to their Percentage Interests shall be allocated among the Partners
in the same manner as provided in this Section in the case of a Transfer of a
Partnership Interest.
20
SECTION 5.7 [INTENTIONALLY OMITTED]
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SECTION 5.8 SPECIAL ALLOCATIONS TO COMPLY WITH SECTION 704 REGULATIONS.
----------- -----------------------------------------------------------
(a) GENERAL RULE. Notwithstanding the provisions of Section 5.3,
if the allocation of a Loss to the Limited Partner for any Fiscal Year pursuant
to Section 5.3 would cause or increase a negative balance in such Partner's
Adjusted Capital Account (as defined in Section 5.8(f)) on the last day of the
Fiscal Year which exceeds the sum of such Partner's share of Minimum Gain on
Nonrecourse Liability (as defined in Section 5.8(g)) and such Partner's share of
Minimum Gain on Partner Nonrecourse Debt (as defined in Section 5.8(h)) as of
the last day of the Fiscal Year, then the portion of the Loss that would have
such effect shall instead be specially allocated to the General Partner. For
purposes of this Section, a Partner's share of Minimum Gain on Nonrecourse
Liability and Minimum Gain on Partner Nonrecourse Debt shall be determined
pursuant to Regulations Sections 1.704-2(g)(1) and 1.704-2(i)(5) and a Partner's
share of excess nonrecourse liabilities (as described in Regulations Section
1.752-3(a)(3)) shall be based upon the Partner's Percentage Interest.
(b) QUALIFIED INCOME OFFSET. If, at the end of any Fiscal Year,
the Limited Partner has a negative balance in such Partner's Adjusted Capital
Account which exceeds the sum of such Partner's share of Minimum Gain on
Nonrecourse Liability and the Partner's share of Minimum Gain on Partner
Nonrecourse Debt at the end of the Fiscal Year, then income and gain for the
Fiscal Year (and, if necessary, subsequent Fiscal Years) shall be allocated as
quickly as possible to such Partner to the extent necessary to reduce the
negative balance of such Partner's Adjusted Capital Account to an amount equal
to the sum of such Partner's share of Minimum Gain on Nonrecourse Liability and
the Partner's share of Minimum Gain on Partner Nonrecourse Debt as of the end of
the Fiscal Year; provided that an allocation pursuant to this Section 5.8(b)
shall be made only if and to the extent that such Partner would have such a
negative balance in the Partner's Adjusted Capital Account in excess of the sum
of the Partner's share of Minimum Gain on Nonrecourse Liability and the
Partner's share of Minimum Gain on Partner Nonrecourse Debt after all other
allocations provided for in this Article 5 have been tentatively made as if this
Section 5.8(b) were not a part of this Agreement. The allocations referred to
in this paragraph shall be interpreted and applied to satisfy the requirements
of Regulations Section 1.704-1(b)(2)(ii)(d)(3).
(c) MINIMUM GAIN CHARGEBACK - NONRECOURSE LIABILITY. If there is
a net decrease in the Minimum Gain on Nonrecourse Liability (as defined in
Section 5.8(g)) during any Fiscal Year, the Partners shall be allocated items of
income and gain for the Fiscal Year, before any other allocation of Company
items described in Code Section 704(b) is made for the Fiscal Year (and, if
necessary subsequent Fiscal Years), in the amounts and in the proportions
required by Regulations Sections 1.704-2(f) and 1.704-2(j)(2)(i). The
allocations referred to in this paragraph shall be interpreted and applied to
satisfy the requirements of Regulations Section 1.704-2(f).
(d) MINIMUM GAIN CHARGEBACK - PARTNER NONRECOURSE DEBT. If there
is a decrease in the Minimum Gain on Partner Nonrecourse Debt during a Fiscal
Year, then any Partner who has a share of the Minimum Gain on Partner
Nonrecourse Debt at the beginning of the Fiscal Year shall be allocated items of
income and gain for the Fiscal Year, before any other
21
allocation of Company items described in Code Section 704(b) is made for the
Fiscal Year (and, if necessary, subsequent Fiscal Years), in the amounts and in
the proportions required by Regulations Sections 1.704-2(i)(4) and
1.704-2(j)(2)(ii). The allocations referred to in this paragraph shall be
interpreted and applied to satisfy the requirements of Regulations Section
1.704-2(i)(4).
(e) PARTNER NONRECOURSE DEBT DEDUCTIONS. Partner Nonrecourse
Deductions with respect to Partner Nonrecourse Debt shall be specially allocated
among the Partner or Partners who bear the economic risk of loss with respect to
such Partner Nonrecourse Debt in the amounts and in the proportions required by
Regulations Section 1.704-2(i)(1). The allocations referred to in this
subsection shall be interpreted and applied to satisfy the requirements of
Regulations Section 1.704-2(i).
(f) ADJUSTED CAPITAL ACCOUNT. The term "Adjusted Capital Account"
shall mean the amount of a Partner's Capital Account (determined before the
special allocation to be made pursuant to this subsection, but after making all
other adjustments to Capital Account for the Fiscal Year with respect to
contributions, allocations and distributions), whether positive or negative,
reduced by reasonably expected adjustments described in Regulations Section
1.704-1(b)(2)(ii)(d)(4) and by reasonably expected allocations of loss and
deduction described in Regulations Section 1.704-1(b)(2)(ii)(d)(5) and
reasonably expected distributions described in Regulations Section
1.704-1(b)(2)(ii)(d)(6), and increased by the amount of the Partner's "risk of
loss" (as defined in Regulations Section 1.752-2(b)) with respect to the
recourse liabilities of the Company.
(g) MINIMUM GAIN ON NONRECOURSE LIABILITY. The term "Minimum Gain
on Nonrecourse Liability" shall mean the aggregate amount of gain, if any, that
would be realized by the Company if, in a taxable transaction, it disposed of
all Company property subject to Nonrecourse Liabilities of the Company (as
defined in Regulations Section 1.704-2(b)(3)) in full satisfaction thereof (and
for no other consideration). The Partners intend that Minimum Gain on
Nonrecourse Liability shall be determined in accordance with the provisions of
Regulations Section 1.704-2(d)(1).
(h) MINIMUM GAIN ON PARTNER NONRECOURSE DEBT. The term "Minimum
Gain on Partner Nonrecourse Debt" shall mean the aggregate amount of gain, if
any, that would be realized by the Company if, in a taxable transaction, it
disposed of all Company property encumbered by Mortgages securing Partner
Nonrecourse Debt of the Company (i.e., a nonrecourse debt for which one or more
of the Partners bears the economic risk of loss, and defined in Regulations
Section 1.704-2(b)(4)), in full satisfaction thereof (and for no other
consideration). The Partners intend that Minimum Gain on Partner Nonrecourse
Debt shall be determined in accordance with the provisions of Regulations
Section 1.704-2(i)(3).
(i) LOSS ALLOCATION AMOUNT. The term "Loss Allocation Amount"
shall mean (i) in the case of a Partner who has a positive balance in its, his
or her Adjusted Capital Account, an amount equal to the sum of (x) the positive
balance in the Partner's Adjusted Capital Account, (y) the Partner's share of
Minimum Gain on Nonrecourse Liability, and (z) the Partner's share of Minimum
Gain on Partner Nonrecourse Debt, or (ii) in the case of a Partner who has a
negative balance in its, his or her Adjusted Capital Account which does not
exceed the sum of the
22
Partner's share of Minimum Gain on Nonrecourse Liability and the Partner's share
of Minimum Gain on Partner Nonrecourse Debt, an amount equal to the excess of
(x) the sum of the Partner's share of Minimum Gain on Nonrecourse Liability and
the Partner's share of Minimum Gain on Partner Nonrecourse Debt, over (y) the
balance of the Partner's Adjusted Capital Account (treated as a positive
number).
(j) INCOME ALLOCATION AMOUNT. The term "Income Allocation Amount"
shall mean, in the case of a Partner who has a negative balance in its, his or
her Adjusted Capital Account which exceeds the sum of the Partner's share of
Minimum Gain on Nonrecourse Liability and the Partner's share of Minimum Gain on
Partner Nonrecourse Debt, an amount equal to such excess.
(k) GROSS INCOME ALLOCATION. Each Partner who has a deficit
Capital Account at the end of any Fiscal Year which is in excess of the sum of
the Partner's share of Minimum Gain on Nonrecourse Liability and the Partner's
share of Minimum Gain on Partner Nonrecourse Debt shall be specially allocated
items of Company income and gain in the amount of such excess as quickly as
possible, provided that an allocation pursuant to this Section 5.8(k) shall be
made only if and to the extent that such Partner would have a deficit Capital
Account in excess of such sum after all other allocations provided for in this
Article 5 have been made as if Section 5.8(b) and this Section 5.8(k) were not a
part of this Agreement.
(l) NONRECOURSE DEDUCTIONS. Nonrecourse Deductions for any Fiscal
Year shall be specially allocated among the Partners, pro rata, in accordance
--- ----
with their Percentage Interests.
(m) SECTION 754 ADJUSTMENTS. In any case where an adjustment to
the Adjusted Basis of any Company asset pursuant to Sections 734(b) or 743(b) of
the Code is required (pursuant to Regulations Section 1.704-1(b)(2)(iv)(m)(2) or
Regulations 1.704-1(b)(2)(iv)(m)(4)), to be taken into account in determining
Capital Accounts because of a distribution to a Partner in complete liquidation
of the Partner's interest in the Company, the amount of such adjustment to
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 among the Partners in
accordance with their interests in the Company in the event that (i) Regulations
Section 1.704-1(b)(2)(iv)(m)(2) applies, or (ii) the Partners to whom such
distribution was made in the event that Regulations Section
1.704-1(b)(2)(iv)(m)(4) applies.
(n) CURATIVE ALLOCATIONS. The term "Regulatory Allocations" shall
mean the allocations set forth in Section 5.8(a) through Section 5.8(e) and
Section 5.8(k) through Section 5.8(m). Offsetting special allocations of
Company income, gain, loss or deduction shall be made so that, after such
offsetting allocations are made, each Partner's Capital Account is, to the
extent possible, equal to the Capital Account such Partner would have had if the
Regulatory Allocations were not included in this Agreement. For this purpose,
future Regulatory Allocations under Section 5.8(c) and Section 5.8(d) that are
likely to offset current Regulatory Allocations under Section 5.8(e) and Section
5.8(l) shall be taken into account.
23
SECTION 5.9 TAXATION AS A PARTNERSHIP. The Company shall be treated as a
----------- --------------------------
partnership for federal income tax purposes.
SECTION 5.10 ASSIGNEES TREATED AS PARTNERS. For all purposes of this
------------ ------------------------------
Article 5, but for no other purpose, an Assignee of a Partnership Interest shall
be treated as a Partner and each reference in this Article 5 to the Partners
shall be deemed to include Assignees.
SECTION 5.11 TAX MATTERS PARTNER. The General Partner shall be the "tax
------------ --------------------
matters partner" of the Company pursuant to Section 6231(a)(7) of the Code (the
"Tax Matters Partner"). The Tax Matters Partner shall be authorized and
required to represent the Company (at the expense of the Company) in connection
with all examinations of the affairs of the Company by any federal, state or
local tax authorities, including any resulting administrative and judicial
proceedings, and to expend funds of the Company for professional services and
costs associated therewith. The Tax Matters Partner shall take all actions
necessary to preserve the rights of the Partners with respect to audits and
shall provide all Partners with notices of all such proceedings and other
information as required by law. The Tax Matters Partner shall obtain the prior
written consent of each Partner before settling, compromising or otherwise
altering the defense of any proceeding before the Internal Revenue Service if
such Partner or any of its constituent partners or Partners could be affected
thereby. The Tax Matters Partner shall keep the Partners timely informed of its
activities under this Section. The Tax Matters Partner may prepare and file
protests or other appropriate responses to such audits affecting the Company.
The Tax Matters Partner shall select counsel to represent the Company in
connection with any audit conducted by the Internal Revenue Service or by any
state or local authority. All costs incurred in connection with the foregoing
activities, including legal and accounting costs, shall be borne by the Company.
Any additional expenses with respect to judicial review of adverse
determinations in connection with any such tax audits or the defense of 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 Partner's
ownership of its, his or her Partnership Interest shall only be incurred by the
Partner(s) who have authorized the Tax Matters Partner, in writing, to proceed
with such judicial review or defense. Each Partner agrees to cooperate with the
Tax Matters Partner and to do or refrain from doing any or all things reasonably
required by the Tax Matters Partner in connection with the conduct of all such
proceedings. With respect to the Company, the Tax Matters Partner shall not
take any action which reasonably could jeopardize any Partner that is a Real
Estate Investment Trust under the Code (or any partner of any Partner that is a
Real Estate Investment Trust under the Code) from qualifying as such.
ARTICLE 6
RIGHTS AND DUTIES OF PARTNERS
SECTION 6.1 MANAGEMENT. Subject to the provisions of Section 6.4, the
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business and affairs of the Company shall be managed under the direction of the
General Partner, who may exercise all powers of the Company and perform or
authorize the performance of all lawful acts which do not by the Act or this
Agreement require the consent of the Limited Partner. The General Partner shall
also be responsible for the implementation of Major Decisions approved by the
Partners. All acts of the General Partner within the scope of
its authority shall bind the Company. Unless
24
otherwise set forth in this Agreement, any approval or consent of the Partners
shall require the unanimous consent of the General Partner and the Limited
Partner(s).
SECTION 6.2 LIABILITY OF PARTNERS. Except as otherwise provided in Sections
----------- ----------------------
4.2 and 4.3, no Partner shall be obligated to make Capital Contributions to the
Company. No Partner shall have any personal liability with respect to the
liabilities or obligations of the Company. The failure of the Company to
observe any formalities or requirements relating to the exercise of its powers
or the management of its business or affairs under this Agreement or the Act
shall not be grounds for imposing personal liability on the Partners for
liabilities or obligations of the Company.
SECTION 6.3 INDEMNIFICATION. To the fullest extent permitted by the laws of
----------- ----------------
the State of Delaware, each of the General Partner and the Limited Partner shall
be entitled to indemnity from the Company and each Subsidiary for any losses or
expenses (including reasonable legal fees and costs of investigation) incurred
by it with respect to any claim arising out of any act performed by it within
the scope of the authority (if any) conferred on it by this Agreement, except
for acts of fraud, gross negligence, misrepresentation, breach of fiduciary duty
or willful misconduct.
SECTION 6.4 MAJOR DECISIONS. Notwithstanding anything in this Agreement to
----------- ----------------
the contrary, and in addition to any decisions which, pursuant to the terms of
this Agreement, require the consent of the Partners, none of the following
decisions involving the conduct of the business and affairs of the Company (the
"Major Decisions") shall be made unless approved in writing by the Limited
Partner:
(a) subject to Section 8.4 and Article 12, selling, leasing or
otherwise disposing of, or granting a Mortgage, pledge, encumbrance, lien or
security interest in or on, all or any substantial part of any of the Properties
and/or assets of the Company, including the granting of options and rights of
first refusal;
(b) creating, incurring, assuming, extending, modifying or
otherwise becoming liable with respect to any Company Loan (including guarantees
of the indebtedness or other obligations of any Person or of any Affiliate of
the Company), in any transaction or series of transactions, that result or will
result in such obligations or indebtedness being outstanding at any time or
causing or permitting any Subsidiary to take any such action;
(c) authorizing or entering into any agreements, commitment or
other transaction, or any series of related agreements, commitments or other
transactions, requiring payment(s) by the Company or any Subsidiary exceeding
$25,000, unless otherwise provided in the applicable Subsidiary Budget;
(d) consummating a Proposed Acquisition or acquiring any real
property, whether improved or unimproved or any interest therein, or causing or
permitting any Subsidiary to take any such action except pursuant to an approved
Subsidiary Budget;
(e) employing or retaining, on behalf of the Company, Persons to
operate and manage the business of the Company, including accountants, attorneys
and consultants;
25
(f) amending this Agreement, amending any organic or constituent
document or instrument of any Subsidiary or amending in any material respect, or
waiving any material rights in, any agreement the entering into of which was a
Major Decision;
(g) amending, changing, modifying or supplementing the Acquisition
Profile;
(h) subject to clause (c), above, amending, changing, modifying or
supplementing any Subsidiary Budget;
(i) assigning any property of the Company or any Subsidiary in
trust for creditors;
(j) confessing a judgment against the Company or any Subsidiary or
its or their assets, or any portion thereof, except as otherwise provided in the
documents evidencing or securing a Company Loan incurred on or before the
Effective Date or approved by the Limited Partner;
(k) lending money to, or guaranteeing the debts or other
obligations of, a Partner or any other Person, or causing or permitting the
Company or any Subsidiary to take any such action;
(l) entering into or amending, a contract between the Company or
any Subsidiary, on the one hand, and a Partner, HHMLP, or any Affiliate of a
Partner, HHMLP or the Company on the other hand, or paying fees or other
compensation to a Partner, HHMLP or an Affiliate of a Partner, HHMLP, or the
Company;
(m) entering into any management agreement for any of the
Properties;
(n) causing the Company or any Subsidiary to amend, terminate,
request or grant, a waiver under, any of the documents relating to a Company
Loan;
(o) changing the name of the Company or any Subsidiary;
(p) except as otherwise provided in Article 15, dissolving,
liquidating and winding-up the affairs of the Company or any Subsidiary;
(q) merging or consolidating the Company or any Subsidiary with or
into any other partnership, limited liability company, corporation or other
entity;
(r) commencing, settling or dismissing litigation by or against
the Company or any Subsidiary (other than proceedings against a Partner to
enforce the Partner's obligations under this Agreement); defending, settling,
adjusting, compounding, submitting to arbitration or compromising any actions,
suits, accounts, reckonings, claims or demands whatsoever that now are or
hereafter shall be pending between the Company and/or any Subsidiary and any
Person (other than disputes between or among Partners), at law or in equity;
26
(s) except as required by law, causing any document to be recorded
on behalf of the Company or any Subsidiary in any public record which would
adversely affect title to any asset or Property of the Company or any
Subsidiary;
(t) paying the principal of any Company Loan at any time prior to
its Maturity or refinancing any Company Loan at any time prior to its Maturity;
provided, however, that payments of regularly scheduled debt service (including
principal amortization) required under the terms of any Company Loan shall not
constitute a Major Decision;
(u) making tax elections on behalf of the Company or any
Subsidiary pursuant to the Code;
(v) approving any federal or state income tax return for the
Company or any Subsidiary or authorizing the filing thereof;
(w) causing the Company or a Subsidiary to engage in any business
or activity other than those referred to in Section 3.1;
(x) causing the Company or any Subsidiary to take any of the
actions described in Section 10(d); and
(y) entering into any agreement, contract, understanding or other
arrangement providing for any of the foregoing transactions or matters.
If there shall at any time be a violation or an attempted violation of any
of the provisions of this Section 6.4 and any rights hereby granted, then any
Partner shall, in addition to all rights and remedies at law or in equity, be
entitled to a decree or order restraining such violation; it being hereby
acknowledged and agreed that damages at law will not be an adequate remedy for a
breach or violation of the provisions set forth in this Section 6.4 and, with
respect to such remedy, no Partner shall be required to post bond in connection
with same.
SECTION 6.5 INTENTIONALLY OMITTED. Section 6.6 Signing of Documents.
----------- ---------------------
The General Partner is authorized, in the name and on behalf of the Company, to
sign and deliver all contracts, agreements, leases, notes, mortgages and other
documents and instruments (collectively, "Documents") which are necessary,
appropriate or convenient for the conduct of the Company's day-to-day business
and the furtherance of its purposes or which are necessary, appropriate or
convenient to carry out Major Decisions approved by the Limited Partner pursuant
to Section 6.4.
SECTION 6.7 RIGHT TO RELY ON AUTHORITY OF GENERAL PARTNER. No Person
----------- ----------------------------------------------
dealing with the General Partner shall be required to determine the authority
of the General Partner to make any undertaking on behalf of the Company, or to
determine any fact or circumstance bearing upon the existence of the authority
of the General Partner. Every Document executed by the General Partner shall be
conclusive evidence in favor of every Person relying thereon or claiming
thereunder that:
(a) at the time of the execution or delivery of the Document, the
Company was in existence and this Agreement was in full force and effect;
27
(b) the Document was duly approved by the General Partner or the
Partners in accordance with this Agreement and is binding upon the Company; and
(c) the General Partner was duly authorized and empowered to
execute and deliver the Document for and on behalf of the Company.
SECTION 6.8 OUTSIDE ACTIVITIES. Each Partner and any Person who is an
----------- -------------------
Affiliate of a Partner may engage or hold interests in other business ventures
of every kind and description for the Partner's or the Affiliate's own account,
whether or not such business ventures are in direct or indirect competition with
the business of the Company and whether or not the Company has any interest
therein. Neither the Company nor any of the Partners shall have any rights by
virtue of this Agreement in such independent business ventures or to the income
or profits derived therefrom. Notwithstanding the above, the General Partner and
HHMLP are obligated to present to the Company and not otherwise acquire any
Proposed Acquisition in violation of the provisions set forth in Section 3.1.
In the event a Proposed Acquisition is rejected by the Investment Committee or
not otherwise recommended to the Partners for purposes of considering
consummation of such proposal, or recommended to the Partners and rejected by
the Partners, the General Partner, HHMLP and/or their Affiliates may consummate
the Proposed Acquisition.
SECTION 6.9 LIMITATIONS ON POWERS OF PARTNERS. Except as expressly
----------- ----------------------------------
authorized by this Agreement, no Partner shall, directly or indirectly, (i)
resign, retire or withdraw from the Company, (ii) dissolve, terminate or
liquidate the Company, (iii) petition a court for the dissolution, termination
or liquidation of the Company, or (iv) cause any property of the Company to be
subject to the authority of any court, trustee or receiver (including suits for
partition and bankruptcy, insolvency and similar proceedings).
SECTION 6.10 PROHIBITION AGAINST PARTITION; DISTRIBUTION IN KIND. Each
------------ ----------------------------------------------------
Partner irrevocably waives any and all rights the Partner may have to maintain
an action for partition with respect to any Property or asset of any Subsidiary
or assets of the Company or any right to take any other action that otherwise
might be available to such Partner for the purpose of severing such Partner's
interest in the assets held by the Company from the interest of the other
Partners. A Partner, regardless of the nature of its, his or her contribution,
has no right to demand and receive any distribution from the Company in any form
other than cash.
SECTION 6.11 BUDGETS. (a) Subsidiary Budget. The General Partner shall
------------ -------
prepare an operating budget for each Subsidiary, in connection with any Approved
Acquisition which, prior to becoming effective, shall require the approval of
the Limited Partner (each, a "Subsidiary Budget").
(b) Approvals and Implementation of Budget. No Subsidiary Budget
may hereafter be changed without the consent of the Limited Partner, except as
provided in Section 6.4(c) or to take into account Emergency Costs. The General
Partner shall implement, or cause to be implemented, each Subsidiary Budget and
shall be authorized, subject to the provisions of Section 6.4, without the need
for further approval by the Limited Partner, to make the expenditures and incur
the obligations provided for in such Subsidiary Budget. The General Partner
shall, in the performance of its duties hereunder, comply with each Subsidiary
Budget
28
and shall not (except to the extent required as a result of violations of law or
changes of law) deviate therefrom, incur additional expenses or materially
change the manner of operation of the Company or any Subsidiary without the
approval of the Limited Partner, except as provided in Section 6.4(c) or to
incur Emergency Costs. The General Partner shall use its reasonable best efforts
to cause the Properties to be operated and managed for the account of the
Subsidiary within the parameters of each Subsidiary Budget. If at any time the
General Partner shall, in the performance of its duties hereunder, determine
that any Subsidiary Budget is no longer appropriate because of any reason
(including, without limitation, the need to incur additional expenses) the
General Partner shall promptly submit to the Limited Partner for its
consideration a revised Subsidiary Budget (or adjusted forecasts by way of
supplement to such Subsidiary Budget) for such Subsidiary. When approved by the
Limited Partner, the General Partner shall implement the revised Subsidiary
Budget and shall be authorized, without the need for further approval by the
Limited Partners, to make the expenditures and incur the obligations provided
for in the applicable revised Subsidiary Budget.
ARTICLE 7
BOOKS OF ACCOUNT AND REPORTS; ACCESS TO RECORDS
SECTION 7.1 BOOKS AND RECORDS.The General Partner shall keep, or cause to be
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kept, at the principal place of business of the Company (or at such other place
of business or office as the General Partner may designate) true and correct
books of account, in which shall be entered fully and accurately each and every
transaction of the Company. Each Partner or such Partner's designated agent
shall have access at reasonable times on Business Days at the Company's office
to the Company's books of account and all other information concerning the
Company required by the Act to be made available to Partners, and may make
copies thereof at such Partner's expense. A Partner must give the Company
written notice of its desire to exercise rights under the preceding sentence at
least three Business Days in advance. The Company's books shall be kept on the
accrual method of accounting in accordance with GAAP, consistently applied, and
for a fiscal period which is the Fiscal Year. Any Partner shall have the right
to a private audit of the books and records of the Company, provided such audit
is made at the office of the Company at which such books and records are located
and at the expense of the Partner desiring it and is made at reasonable times on
Business Days, after written notice given to the Company at least fifteen (15)
Business Days in advance.
SECTION 7.2 BANKING. All funds of the Company shall be deposited in its
----------- --------
name in such commercial bank or invested in such federally-insured savings and
loan account or accounts, in such U.S. Treasury obligations, or in such bank
certificates of deposit, as the General Partner may determine (the "Bank
Accounts"). All withdrawals from any such Bank Account shall be made upon a
check or order signed by any individual designated by the General Partner from
time to time; but the General Partner may restrict the amounts that can be
withdrawn by any such individual. All such withdrawn funds shall only be used
for Company purposes as provided in this Agreement and in accordance with the
terms hereof.
SECTION 7.3 REPORTS TO PARTNERS. The General Partner shall cause the Company
----------- --------------------
to prepare and deliver to each Partner the following financial reports with
respect to the Company and the Subsidiaries: (i) within twenty (20) days after
the end of each calendar month, unaudited
29
consolidated monthly financial statements for such calendar month, including a
balance sheet, a statement of income and expense and a cash flow statement, (ii)
concurrently with the delivery to the holder of a Mortgage encumbering any
Property, a copy of all financial statements and other reports delivered by the
Company to such holder, and (iii) within ninety (90) days after the end of each
Fiscal Year, audited financial statements certified by an independent public
accountant, including a balance sheet, a statement of income and expense and a
statement of source and application of funds, and the information necessary to
enable the Partner to complete such Partner's federal and state income tax
returns for such Fiscal Year.
SECTION 7.4 ACCOUNTANTS. The General Partner shall cause the Company to
----------- ------------
retain PriceWaterhouseCoopers, LLP or any other "big four" accounting firm of
similar national standing to conduct the year end audit of the Company's
financial statements and to prepare and file the Company's and the Subsidiaries'
federal and state income tax returns by the required filing date including one
extension thereof and to provide other outside accounting services from time to
time required by the Company and the Subsidiaries. The General Partner shall
provide a copy of any such tax return to each Partner for their review and
comment, at least fifteen (15) days prior to its filing with the relevant taxing
authority. In no event shall any such tax return be filed after September 15th
of the year in which the filing date occurs.
SECTION 7.5 INTERIM TAX INFORMATION. Within twenty (20) days after the end
----------- ------------------------
of every calendar quarter, the General Partner shall provide to the other
Partners an estimate of their allocable share of the year-to-date depreciation
and amortization.
ARTICLE 8
TRANSFERS OF PARTNERSHIP INTERESTS AND ECONOMIC RIGHTS
SECTION 8.1 PARTNER'S OR ASSIGNEE'S RIGHT TO TRANSFER. A Partner may
----------- ------------------------------------------
Transfer all or a part of the Partner's Partnership Interest and an Assignee may
Transfer all or a part of the Assignee's Economic Rights, but only if the
Partner or the Assignee complies with the provisions of Section 8.2.
SECTION 8.2 CONDITIONS OF TRANSFER. Except as otherwise provided in Section
----------- -----------------------
8.4, no Partnership Interest and/or Economic Rights shall be Transferred prior
to the first anniversary of the date hereof, and thereafter, Partnership
Interests and/or Economic rights shall not be Transferred:
(a) if the Transfer is prohibited by, or would cause a default
under, any Mortgage encumbering the Property, under any loan agreement or
guaranty to which the Company or any Subsidiary is a party;
(b) in the case of a Transfer to a Person who is not a Partner or
a Permitted Transferee, unless the Company receives an opinion of counsel
satisfactory to the other Partners that such Transfer is exempt from the
registration requirements of any applicable federal or state securities laws;
(c) in the case of a Transfer to a Person who is not a Partner,
unless the Company receives from the Person to whom the Partnership Interest or
the Economic Rights are
30
Transferred, such Person's taxpayer or employer identification number and any
other information reasonably requested by the General Partner; and
(d) in the case of a Transfer to a Person who is not a Partner or
a Permitted Transferee, unless (i) the Partner or the Assignee desiring to make
the Transfer provides to the other Partners a First Offer (as defined in Section
8.3(d)) or obtains a Third Party Offer (as defined in Section 8.3(d)) for the
purchase of all (but not less than all) of such Partner's or Assignee's
Partnership Interest or Economic Rights, as the case may be, and offers to sell
the Partnership Interest or the Economic Rights that are the subject of the
First Offer or Third Party Offer to the other Partners pursuant to Section 8.3,
and (ii) the other Partners do not exercise the option to purchase such
Partnership Interest or the Economic Rights within the time and in the manner
required by Section 8.3.
Except as may be agreed to by all Partners, no Transfer shall be
permitted which would operate to affect the status of the Company as a limited
partnership for state law or federal income tax purposes, or cause a termination
of the Company under Section 708 the Code, or applicable successor law, for
Federal or state income tax purposes. No Partner shall consent to a Transfer of
Partnership Interests in such Partner to the extent that such Transfer would
cause a termination of such Partner under Section 708 of the Code. Before any
such Transfer is accomplished, the Partner desiring to Transfer its Partnership
Interest shall be required, upon request of the Partner not Affiliated with the
Partner desiring to Transfer ("NonAffiliated Partner"), to present to the
NonAffiliated Partner an opinion of reputable tax counsel, in form and substance
acceptable to the NonAffiliated Partner, that the contemplated Transfer will not
result in a termination of the Company for federal income tax purposes.
SECTION 8.3 PARTNERS' RIGHTS OF FIRST OFFER AND FIRST REFUSAL.
----------- -------------------------------------------------
(a) A Transfer of a Partnership Interest by a Partner permitted by
Section 8.2(d) shall not be made without first giving to the other Partners a
notice (the "Offering Notice") in which the Partner or the Assignee (hereinafter
referred to as the "Offeror") irrevocably offers to sell to the Partner(s) to
whom the Offering Notice is given (the "Offeree"), Offeror's entire Partnership
Interest or Economic Rights (hereinafter referred to as the "Offered Interest")
on the terms and conditions set forth in this Section. The Offering Notice
shall be accompanied by a copy of the First Offer (as defined herein) or a true,
correct and complete copy of the Third Party Offer (as defined herein). In the
case of a Third Party Offer, the giving of an Offering Notice shall constitute a
representation and warranty by the Offeror to the Offeree that the Third Party
Offer is to the best of the Offeror's knowledge, bona fide in all respects.
(b) For a period of thirty (30) days after receipt of the Offering
Notice the Offeree shall have the option to purchase the Offered Interest for
the same purchase price and on the same terms set forth in the First Offer or
Third Party Offer. The Offeree may exercise its option to purchase the Offered
Interest only by giving notice to the Offeror within the thirty (30)-day period.
(c) If, within the thirty (30)-day period referred to in Section
8.3(b), the Offeree does not give notice to the Offeror of the exercise of its
option to purchase the entire Offered Interest, the Offeror shall be free to
Transfer the Offered Interest to any Person in the
31
case of a First Offer or to the Person who made the Third Party Offer, in the
case of a Third Party Offer, but the Transfer must be consummated within one
hundred twenty (120) days after the expiration of the thirty (30)-day period
referred to in Section 8.3(b) strictly in accordance with the terms of the First
Offer or Third Party Offer (provided, however, that in the case of a First
Offer, the Transfer may be for a higher price and/or on less favorable terms to
the buyer than the price or the terms specified in the First Offer). If the
Transfer of the Offered Interest is not consummated within one hundred twenty
(120) days after the expiration of the thirty (30)-day period referred to in
Section 8.3(b), the Offeror may not thereafter Transfer all or any part of its
Partnership Interest to the same Person who made the Third Party Offer or to any
other Person without first complying with the provisions of this Section. If a
Partner's Partnership Interest is Transferred to a Person who is not a Permitted
Transferee, the transferee shall be an Assignee but shall not become a Partner
unless admitted as such pursuant to the provisions of Section 9.2.
(d) For purposes of this Section 8.3, the term "First Offer,"
means a written offer to sell a Partner's entire Partnership Interest for a
specified price payable in cash. For the purposes of this Section 8.3, the term
"Third Party Offer" shall mean a written offer to purchase a Partner's entire
Partnership Interest, as the case may be, open for acceptance for at least
thirty (30) days, for a specified price from a financially responsible Person,
identified therein by name and address, who is financially capable of complying
with the terms of the Third Party Offer and who is unrelated, directly or
indirectly, to the Partner or the Assignee, or any Affiliate thereof, and which
does not contain terms or conditions which the Offeree, for reasons other than
its financial condition, are not reasonably capable of performing, such as
payment in a specific form of property (such as corporate stock or a unique or
specific item or class of property) not readily available to the Offeree or for
which no recognized or adequate public market exists. The Person who makes the
Third Party Offer shall be deemed to be "unrelated" only if it is not an
Affiliate of the Partner or the Assignee and there is no arrangement of any kind
whereby the Partner or the Assignee, directly or indirectly, will be financially
interested in the ownership of the Property, or any interest therein, after the
sale of the Partnership Interests. If the Person making the Third Party Offer
is a corporation, limited liability company partnership, or other entity, all
shareholders, members or partners owning more than ten percent (10%) of its
stock, membership interests partnership interests or other equity interests
shall be identified.
SECTION 8.4 CREATION OF LIEN AND SECURITY INTEREST.A Partner or an Assignee
----------- ---------------------------------------
may, without complying with the provisions of Sections 8.2(b), (c) or (d) or
Section 8.3, grant a security interest (within the meaning of the Uniform
Commercial Code in effect in the jurisdiction in which such Partner's chief
place of business is located) with respect to all or a part of the Partner's
Partnership Interest or the Assignee's Economic Rights to an Institutional
Lender as security for a debt. Any such grant of a security interest shall, by
its terms, be subject to the terms and provisions of this Agreement, including
specifically, those of Section 8.3, and the Institutional Lender shall in any
such instrument acknowledge the terms hereof. Any Transfer of such Partnership
Interest or Economic Rights by the Institutional Lender incident to the
enforcement of its rights or remedies under the documents evidencing or securing
the loan must comply with the provisions of Section 8.2 and Section 8.3.
SECTION 8.5 NON-COMPLYING TRANSFERS VOID. Any attempted Transfer of all or
----------- -----------------------------
any part of a Partner's Partnership Interest or an Assignee's Economic Rights
that does not comply with the provisions of Section 8.2 shall be null and void
and of no legal effect.
32
ARTICLE 9
ADMISSION OF ASSIGNEES
SECTION 9.1 RIGHTS OF ASSIGNEES.The Assignee of a Partnership Interest has
----------- --------------------
no management or voting rights and, unless the Assignee is a Permitted
Transferee, no right to become a Partner. The Assignee's only rights are the
Economic Rights allocable to the Transferred Partnership Interest.
SECTION 9.2 ADMISSION OF ASSIGNEE AS A PARTNER. Subject to Section 8.2, an
----------- -----------------------------------
Assignee shall be admitted as a Partner with all rights of the Partner who
initially Transferred the Partnership Interest to the Assignee, but only if (i)
the Partner who initially Transferred the Partnership Interest so provides in
the instrument of Transfer, (ii) the Assignee agrees in writing to be bound by
the provisions of this Agreement, and (iii) the Partners consent in writing to
the admission of the Assignee as a Partner. Each Partner shall have the right
to give or withhold its consent to the admission of the Assignee as a Partner in
such Partner's sole and absolute discretion. An Assignee who is admitted as a
Partner shall have all the rights and powers and be subject to all the
restrictions and liabilities of the Partner who originally Transferred the
Partnership Interest. The admission of the Assignee as a Partner, without more,
shall not release the Partner who originally Transferred the Partnership
Interest from any liability to the Company that exists before such admission.
SECTION 9.3 ADMISSION OF PERMITTED TRANSFEREE AS PARTNER. A Permitted
----------- ---------------------------------------------
Transferee to whom a Partnership Interest is Transferred shall be admitted as a
Partner, without the necessity of obtaining the written consent of the other
Partners, only if the conditions described in clauses (i) and (ii) of Section
9.2 are satisfied.
ARTICLE 10
DEFAULT AND REMEDIES
SECTION 10.1 EVENTS OF DEFAULT. Each of the following events shall be
------------ ------------------
deemed to be, and is referred to in this Agreement as, an "Event of Default":
(a) a default by a Partner
either (i) within the meaning of Section 4.3(b), in paying the
Partner's share of an Additional Capital Contribution to the Company on the
Due Date or (ii) in the case of the General Partner, within the meaning of
Section 5.1(a)(ii), in returning to the holders of the Limited Partner
Units any excess amounts distributed to the General Partner as part of the
Administration Fee or General Partner Preferred Distribution within the
fifteen (15) day period provided therein, which in any event described in
the foregoing clause (i) or (ii) continues for more than ten (10) days
after the Nondefaulting Partner gives a written notice to the Defaulting
Partner, specifying the default.
(b) a default by a Partner in performing or observing any of the
provisions of this Agreement (other than those referred to in subsection (d)
below, which events will not be remediable) which is not remedied by the Partner
(i) within fifteen (15) days after the
33
Nondefaulting Partner gives a written notice to the Defaulting Partner,
specifying the default, or (ii) in the case of a default which cannot in good
faith be cured within fifteen (15) days, within such additional period, if any,
as may be reasonably required by the Defaulting Partner to cure the default in
good faith provided that the Defaulting Partner commences the curing of the same
within the fifteen (15)-day period (it being intended that, in connection with
any default which is not susceptible of being cured in good faith within fifteen
(15) days, the time within which the Defaulting Partner is required to cure the
default shall be extended for such additional period as may be reasonably
necessary to cure the default in good faith but in no event shall such
additional period exceed 45 days);
(c) Transfer by a Partner of the Partner's Partnership Interest in
a manner not permitted by Article 8;
(d) the taking of any of the following actions by a Partner (with
respect to such Partner) pursuant to or within the meaning of Title 11, Federal
Bankruptcy Code (11 U.S.C.A.) or any similar federal or state law for the relief
of debtors ("Bankruptcy Law"):
(i) commencing a voluntary case;
(ii) consenting to the entry of an order for relief against
the Partner in an involuntary case;
(iii) consenting to the appointment of a receiver, trustee,
assignee, liquidator or similar official under any Bankruptcy Law (a
"Custodian") of the Partner or for all or substantially all of the
Partner's property;
(iv) making a general assignment for the benefit of the
Partner's creditors; or
(v) the entry by a court of competent jurisdiction of an
order or decree under any Bankruptcy Law that:
(A) is for relief against a Partner in an involuntary
case, which order or decree remains unstayed and in effect for 90 days,
(B) appoints a Custodian of the Partner for all or
substantially all of its property, which order or decree remains unstayed
and in effect for 90 days,
(C) orders the liquidation of the Partner, which order
or decree remains unstayed and in effect for 90 days,
(e) HT's failure to maintain its treatment as a Real Estate
Investment Trust pursuant to the Code;
(f) any uncured breach by HT under that certain Registration
Rights Agreement by and between HT and the Limited Partner dated as of April 21,
2003;
34
(g) any uncured breach by a party other than the Limited Partner
under the Securities Purchase Agreement;
(h) any uncured breach by a party other than the Limited Partner
under that Second Amendment to the Agreement of Limited Partnership of HLP by
and between HT, the Limited Partner, and others dated as of April 21, 2003 (the
"Second Amendment")
(i) any uncured breach by HT under that certain Excepted Holders
Agreement by and between HT and the Limited Partner dated as of April 21, 2003;
(j) any uncured breach by HT under that certain Standstill
Agreement by and between HT and the Limited Partner dated as of April 21, 2003;
(k) the failure of HT or HLP, to pay distributions or dividends
(as the case may be) on "Series A Preferred Units" (pursuant to, and as such
term is defined in, the Second Amendment) and/ or the underlying Series A
Preferred Stock issued pursuant to the Securities Purchase Agreement.
If an Event of Default occurs, the Nondefaulting Partner shall have
the remedies set forth in Section 10.2.
SECTION 10.2 REMEDIES UPON THE OCCURRENCE OF AN EVENT OF DEFAULT.
------------ ---------------------------------------------------
(a) PERCENTAGE INTEREST ADJUSTMENT. If an Event of Default
defined in Section 10.1(a)(i) occurs, any Nondefaulting Partner shall have the
option, but without imposing on it the obligation, to contribute that portion of
the Additional Capital Contribution which the Defaulting Partner was obligated,
but failed, to contribute (and if more than one Nondefaulting Partner exercises
such option, or any other right or option under this Article 10, such option or
right shall be exercised by each Nondefaulting Partner, pro rata, in accordance
with their respective Percentage Interests, or in such other manner as they may
determine, and the term "Nondefaulting Partner" as used in this Article 10 shall
mean the aggregate of such Nondefaulting Partners who exercise such right or
option). The option shall be exercised by giving written notice to the
Defaulting Partner within sixty (60) days after the occurrence of the Event of
Default. If any portion of the Defaulting Partner's share of such Additional
Capital Contribution is not so contributed by the Nondefaulting Partner, the
Nondefaulting Partner shall have the authority to admit one or more new Persons
as limited partners (subject to the provisions of Section 8.2(a) through Section
8.2(c), who shall purchase a Partnership Interest determined in accordance with
Sections 10.2(a)(i) and 10.2(a)(iii) below by making a Capital Contribution to
the Company in immediately available funds. If the Nondefaulting Partner(s)
and/or the new Partner contribute the Defaulting Partner's share of such Capital
Contribution (as well as the Nondefaulting Partner's own share), the Percentage
Interest of the Defaulting Partner and the Nondefaulting Partner shall be
adjusted as follows:
(i) In the case of an Event of Default as described in
Section 10.1(a)(i) (a default by a Partner in paying the Partner's
proportionate share of an Additional Capital Contribution), the Percentage
Interest of the Defaulting Partner shall be reduced to a percentage equal
to ninety-five percent (95%) of a fraction, the numerator of which is the
sum of the Defaulting Partner's Unreturned Capital Contributions as of the
date on
35
which the Event of Default occurs and the denominator of which is the sum
of the aggregate of all Unreturned Capital Contributions of all Partners as
of such date;
(ii) The Percentage Interest of each of the Nondefaulting
Partners who contribute all or a portion of the Defaulting Partner's share,
or of a new partner who contributes all or a portion of such share, shall
be increased or established, as the case may be, by multiplying the
reduction in the Defaulting Partner's Percentage Interest by a fraction,
the numerator of which is the amount of the Defaulting Partner's share
which the Nondefaulting Partner or the new Partner contributed and the
denominator of which is the amount of such share contributed by all of the
Nondefaulting Partner(s) and the new partner;
(iii) A Partner who is a Defaulting Partner shall continue to
be obligated to make Additional Capital Contributions pursuant to Section
4.3.
(b) COMPELLED LIQUIDATION. If any Event of Default occurs, the
Nondefaulting Partner shall have the option, but not the obligation, at any time
during the sixty (60) day period after the Event of Default occurs, to compel
the General Partner to cause the Subsidiaries to sell all the Properties then
owned by the Subsidiaries in the manner set forth in Article 12, without the
need of satisfying the conditions set forth in Section 12.8 hereof, it being
expressly agreed to that such conditions shall not apply in the case of a sale
upon an Event of Default.
(c) PURCHASE OPTION. If any Event of Default occurs (other than
those set forth in Section 10.1(f), (g), (h), (i), or (j)), the Nondefaulting
Partner shall have the absolute right and option to purchase all (but not less
than all) of the Defaulting Partner's Partnership Interest for a price equal to
85% of the sum of the Defaulting Partner's Unreturned Capital Contributions as
of the last day of the calendar month immediately preceding the exercise of such
option. The option may be exercised by the Nondefaulting Partner at any time
during the sixty (60) day period after the date on which the Event of Default
occurs (unless the default is cured before the exercise of the option) by
written notice to the Defaulting Partner. The Defaulting Partner's right to
cure the default shall terminate on the date the Nondefaulting Partner gives
notice of exercise of the option. The closing of the purchase and sale shall be
held within 30 days after the date on which the option is exercised at the
Company's principal office, time being of the essence. The terms of payment
shall be as follows: An amount equal to 10% of the purchase price shall be paid
by the Nondefaulting Partner to the Defaulting Partner at the closing and the
balance of the purchase price shall be evidenced by a promissory note issued by
the Nondefaulting Partner to the Defaulting Partners payable on the third
anniversary of the date of closing, with interest, payable annually, on the
unpaid principal balance at the applicable Federal rate (as defined in Section
1274(d) of the Code) in effect on the date of the notice of exercise of the
option. At the closing, the Defaulting Partner shall execute and deliver such
instruments of assignment of the Defaulting Partner's Partnership Interest as
the Nondefaulting Partner shall reasonably request.
36
ARTICLE 11
BUY-SELL
SECTION 11.1 INITIATION OF PROCEDURE. (a) At any time on or after the
------------ ------------------------
third anniversary of the Effective Date, any Partner (the "Buy/Sell Initiating
Partner") may, by written notice to the other Partner (the "Recipient Partner"),
initiate a buy-sell offer by designating its determination of the fair market
value for each Partner's Partnership Interest (the "Designated Price") and other
terms at which the Buy/Sell Initiating Partner is willing either to buy the
Partnership Interest of the Recipient Partner in the Company or to sell its own
Partnership Interest to the Recipient Partner ("Offer"). If the Recipient
Partner disagrees with such fair market value, and the allocable share of such
fair market value (based upon the Recipient Partner's Percentage Interest) is
less than such Recipient Partner's Unreturned Capital Contributions, then the
"fair market value" shall be determined in accordance with the procedure
specified in Section 11.1(b)) below. For purposes of this Section 11.1, the
Partnership Interest of the Buy/Sell Initiating Partner and the Recipient
Partner shall include any Permitted Transferee(s) of the Buy/Sell Initiating
Partner or the Recipient Partner, as the case may be. The Offer shall be
accompanied by evidence of a cash deposit into the escrow account of counsel to
the Buy/Sell Initiating Partner in an amount equal to ten percent (10%) of the
price to be paid to the Recipient Partner and a comprehensive purchase agreement
(the "Purchase Agreement") containing all terms, conditions, covenants,
representations, warranties and other agreements, except such terms shall
provide for the entire purchase price to be paid in immediately available funds
at closing. The Buy/Sell Initiating Partner shall purchase the Partnership
Interest of the Recipient Partner and its Permitted Transferees subject to all
Company liabilities which shall specifically be assumed by the Buy/Sell
Initiating Partner. The Buy/Sell Initiating Partner shall indemnify the
Recipient Partner and its Permitted Transferees as to said liabilities. In
addition, as a condition to any Partner becoming a Buy/Sell Initiating Partner,
such Partner and the Company shall arrange for the specific release of the
Recipient Partner and/or any Affiliates of the Recipient Partner from the
primary liability (as opposed to continuing liabilities, such as environmental
liabilities, which cannot be released) to any Institutional Lenders having
outstanding loans to the Company (including the cancellation and return of all
guarantees, letters of credit, and other security or assurances posted or made
by the Recipient Partner or any Affiliates of the Recipient Partner).
(b) In the event of a disagreement as to fair market value, fair
market value shall be determined by appraisal in the following manner: (i) all
appraisers shall be members of the Appraisal Institute or any organization
successor thereto; (ii) the Buy/Sell Initiating Partner shall promptly appoint
an appraiser and give notice of the appointment to the Recipient Partner; (iii)
within fifteen (15) days after receipt of the Buy/Sell Initiating Partner's
notice, the Recipient Partner shall appoint a second appraiser, and give notice
of the appointment to the Buy/Sell Initiating Partner; (iv) each appraiser shall
make an independent written appraisal, and (v) if the Recipient Partner fails to
appoint a second appraiser within (15) days after receipt of the Buy/Sell
Initiating Partner's notice of the appointment of the first appraiser, the first
appraiser shall proceed to make his/her appraisal of each Partners' Partnership
Interests and the fair market value of each Partners' Partnership Interests
shall be the amount determined by the first appraiser. If the two (2) appraisers
so appointed agree on the fair market value of each Partners' Partnership
Interests, the fair market value of each Partner's Partnership Interests shall
be the amount determined by them. If the two (2) appraisers so appointed do not
agree on the
37
fair market value and the difference between the two appraisals is not more than
ten percent (10%) of the lower of the two (2) appraisals, the fair market value
of each Partner's Partnership Interests shall be an amount equal to the quotient
obtained by dividing the sum of the fair market values determined by each
appraiser, by two (2). If the two (2) appraisers so appointed do not agree on
the fair market value of each Partner's Partnership Interests, and the
difference between the two appraisals is more than ten percent (10%) of the
lower of the two appraisals, the two appraisers shall jointly appoint a third
appraiser. If the appraisers so appointed shall be unable, within forty-five
(45) days after the appointment of the second appraiser, either to agree on the
fair market value of each Partner's Partnership Interests (or to disagree on
such value with a difference of ten (10%) percent or less), or to agree on the
appointment of a third appraiser, they shall give written notice of such failure
to agree to the Buy/Sell Initiating Partner and the Recipient Partner, and, if
such Partners fail to agree upon the selection of a third appraiser within
fifteen (15) days after the appraisers appointed by the Partners give such
notice, then within twenty (20) days thereafter either Partner upon written
notice to the other Partner may request such appointment by the then President
of the Appraisal Institute (or any organization successor thereto), or in
his/her failure to act, may apply for such appointment to the United States
District Court for the Southern District of New York. If a third appraiser is
appointed, he/she shall make his/her determination within thirty (30) days after
his/her appointment and the fair market value of each Partner's Partnership
Interests shall be the fair market value of each Partner's Partnership Interests
determined by whichever of the first two appraisers is (in the opinion of the
third appraiser) closest in amount to the fair market value of each Partner's
Partnership Interests as determined by the third appraiser. The third appraiser
shall not make an independent appraisal of each Partner's Partnership Interests,
but the third appraiser's function shall be solely to determine which of the
appraisals made by the first two appraisers most closely represents such fair
market value. Each appraiser appointed pursuant to this Section shall be a
disinterested person of recognized competence who has had a minimum of ten (10)
years experience in appraising commercial real estate in the states in which the
Company's properties are located. Each appraiser shall determine the fair market
value of each Partner's Partnership Interests, on the basis of all relevant
factors affecting fair market value. The party appointing each appraiser shall
be obligated, promptly after receipt of the valuation report prepared by the
appraiser appointed by such party, to deliver a copy of such valuation report to
the other party in the manner provided elsewhere in this Agreement for the
giving of notices. If a third appraiser is appointed, the third appraiser shall
be directed, at the time of his or her appointment, to deliver copies of his or
her valuation report, promptly after its completion, to all parties in the
manner provided elsewhere in this Agreement for the giving of notices.
The cost and expense of the appraisers and the appraisal process hereunder
shall be borne equally by the Buy / Sell Initiating Partner and the Recipient
Partner, provided, however, that if the fair market value determined pursuant to
this Section 11.1(b) does not exceed the Designated Price originally offered by
the Buy / Sell Initiating Partner under Section 11.1(a) hereof by more than 10%
of such Designated Price, all costs and expenses of the appraisers and the
appraisal process hereunder shall be borne entirely by the Recipient Partner.
SECTION 11.2 RESPONSE.
------------ --------
(a) Within forty-five (45) days after receipt of written notice of
the Offer (the "Response Period"), the Recipient Partner shall reply to the
Buy/Sell Initiating Partner by giving
38
written notice as to whether such Recipient Partner desires to buy or sell in
accordance with the Offer. The decision of the Recipient Partner shall bind all
Permitted Transferees of such Recipient Partner. In the event the Recipient
Partner elects to purchase the Partnership Interest of the Buy/Sell Initiating
Partner, the election of the Recipient Partner to do so shall be accompanied by
evidence of a cash deposit into the escrow account of counsel to the Recipient
Partner in an amount equal to ten percent (10%) of the purchase price to be paid
to the Buy/Sell Initiating Partner and the deposit of the Buy/Sell Initiating
Partner shall be released.
(b) If a responsive notice is not given by a Recipient Partner to
an Offer before expiration of the Response Period, then such non-responding
Recipient Partner shall be deemed to have elected to sell its Partnership
Interest (and the Partnership Interest of its Permitted Transferees) to the
Buy/Sell Initiating Partner at such price and upon such terms as set forth in
the Offer.
SECTION 11.3 CLOSING. The closing of a purchase and sale pursuant to this
------------ --------
Article 11 shall occur at the end of ninety (90) days after the earlier of the
receipt of notice pursuant to Section 11.2(a) or the expiration of the Response
Period or, in the event of an appraisal proceeding pursuant to Section 11.1 (b)
hereof, at the end of the ninety (90) days after the determination of fair
market value thereunder. If any Partner fails to timely close, the other
Partner shall have the option of either:
(a) canceling the buy-sell contract in which event (A) all of the
terms and provisions of this Agreement, including this Section 11.1 shall remain
in full force and effect, and (B) the Nondefaulting Partner shall be entitled to
retain the deposit made by the defaulting Partner;
(b) purchasing the entire Partnership Interest of the other
Partner in accordance with the terms of the Offer, in the case where the other
Partner defaulted on its obligation to buy, or selling to the other Partner in
accordance with the terms of the Offer, in the case where the other Partner
defaulted on its obligation to sell; or
(c) seeking specific performance of the other Partner's
obligation, without waiver of damages as a result thereof.
ARTICLE 12
SALE OF PROPERTY
SECTION 12.1 PARTNER'S RIGHT TO MAKE PROPOSED OFFER OR TO OBTAIN THIRD PARTY
------------ ---------------------------------------------------------------
OFFERIf a Partner (the "Compelled Sale Initiating Partner") desires that the
-----
Company cause the applicable Subsidiary to sell a Property (a "Compelled Asset
Sale"), the Compelled Sale Initiating Partner shall have the right, except as
otherwise provided in Section 12.4 and subject to any restrictions on sale
imposed on the Company and the applicable Subsidiary by the terms of any
Mortgage encumbering such Property, to deliver to the Company and the
non-Compelled Sale Initiating Partner (the "Compelled Sale Responding Partner")
either:
(a) a proposed offer (the "Proposed Offer") containing (i) the
minimum purchase price (the "Minimum Price") for the Property (grossed up to
include the unpaid
39
principal balance of all Mortgages encumbering the Property, and the unpaid
principal balance of all other indebtedness of the Company and the applicable
Subsidiary for borrowed money attributable to such Property) which the Compelled
Sale Initiating Partner would be willing to cause the Company and applicable
Subsidiary to accept in connection with a sale of the Property to an unrelated
third party for cash (within the meaning of Section 12.6), either free and clear
of, or subject to, Mortgages and easements, covenants, conditions and other
matters affecting title and all leases with tenants and (ii) any and all other
terms and conditions of such proposed Transfer (the "Terms"); or
(b) a Third Party Offer (as defined in Section 12.5) of a
Purchaser (as defined in Section 12.5) providing for the purchase of the
Property for cash (within the meaning of Section 12.6), either free and clear
of, or subject to, Mortgages and easements, covenants, conditions and other
matters affecting title and all leases with tenants.
The delivery of a Third Party Offer by the Compelled Sale Initiating Partner
shall constitute a representation and warranty to the best of the Compelled Sale
Initiating Partner's knowledge to the Compelled Sale Responding Partner that the
Third Party Offer is bona fide in all respects.
SECTION 12.2 RESPONDING PARTNER'S OPTION TO PURCHASE. For a period of
------------ ----------------------------------------
forty-five (45) days after receipt of the Proposed Offer or the Third Party
Offer, as the case may be, the Compelled Sale Responding Partner shall have the
option to purchase the particular Property (i) for an amount equal to the
Minimum Price and on the Terms in the case of a Proposed Offer or (ii) in
accordance with the terms of the Third Party Offer in the case of a Third Party
Offer. The option to purchase the particular Property must be exercised by the
Compelled Sale Responding Partner by giving notice of exercise of the option to
the Initiating Partner within the forty-five (45)-day period. If the Compelled
Sale Responding Partner exercises the option, the closing of the purchase of the
Property shall be in accordance with the Terms or the Third Party Offer, as
applicable.
SECTION 12.3 SALE OF PROPERTY.
------------ ----------------
(a) If the Compelled Sale Responding Partner does not exercise the
option to purchase the Property within forty-five (45) days after receipt of the
Proposed Offer or the Third Party Offer, as the case may be, or if the Compelled
Sale Responding Partner timely exercises the option but the Purchaser thereafter
defaults in consummating the purchase of the Property, the Compelled Sale
Initiating Partner shall have the right at any time within the nine (9) month
period beginning on the date of expiration of the option (or the date of the
Purchaser's default, if applicable), without the necessity of obtaining the
consent or approval of the Compelled Sale Responding Partner (or any other
Partner) or compliance with the 3 year condition set forth in section 12.8, to
cause the applicable Subsidiary to sell the Property for a purchase price
payable in cash (within the meaning of Section 12.6) equal to or greater than
the Minimum Price or the purchase price of the Property payable under the Third
Party Offer, as the case may be (or, if the Compelled Sale Responding Partner
exercises the option but the Purchaser thereafter defaults in purchasing the
Property, for a purchase price payable in cash equal to or greater than ninety
percent (90%) of the Minimum Price or ninety percent (90%) of the purchase price
of the Property payable under the Third Party Offer, as the case may be).
If the Compelled Sale Initiating Partner fails, within the nine (9)-month
period, to cause the Company to consummate a
40
sale of the Property which complies with this Section, the provisions of this
Section shall apply with respect to any future desire on the part of the
Compelled Sale Initiating Partner to cause the Company to sell the Property. Any
sale of the Property in connection with, or as a result of, a Proposed Offer
shall be in accordance with the Terms or terms that are less favorable to the
buyer than the Terms.
(b) Distributions of Capital Proceeds shall be made to the
Partners as follows:
(i) to the holders of Limited Partner Units in an amount
equal to their Unreturned Capital Contributions;
(ii) then to the holders of General Partner Units in an
amount equal to their Unreturned Capital Contributions;
(iii) then to the holders of Limited Partner Units, until the
unpaid Limited Partner Preferred Distributions that are payable to the
holders of the Limited Partner Units have been paid in full;
(iv) then to the holders of General Partner Units, until the
unpaid Administration Fees and General Partner Preferred Distributions that
are payable to the holders of the General Partner Units and the General
Partner have been paid in full; and
(v) thereafter, the balance, if any, to the Partners in
proportion to their Percentage Interests.
(c) Notwithstanding Section 12.3(b), to the extent that taxable
income from a Capital Transaction is allocated to a Partner that has HT as
one of its partners , such Partner shall receive a Distribution of Capital
Proceeds equal to (i) 40% of the income from the Capital Transaction
allocated through the Partner to HT that is characterized as ordinary
income and (ii) 40% of the income from the Capital Transaction allocated
through the Partner to HT that is characterized as capital gain; provided
however, such amount shall be proportionately reduced to the extent a
distribution to CHP is not simultaneously made in an amount at least equal
to 40% of the taxable income from a Capital Transaction allocated through
CHP to CNL Hospitality Properties, Inc., a Maryland corporation. Amounts
otherwise distributable to the Partners pursuant to Sections 5.1, 12.3(b)
and 15.3 shall be reduced by all distributions to such Partners pursuant to
this Section 12.3(c).
SECTION 12.4 EXCEPTIONS. No Partner may (i) deliver a Proposed Offer or a
------------ -----------
Third Party Offer after a Partner has initiated a Buy/Sell in accordance with
Article 11 as long as such Buy/Sell procedure is pending, (ii) deliver a
Proposed Offer after it or another Partner has delivered a Third Party Offer
until the Compelled Sale Responding Partner's option under Section 12.2 has
expired without being exercised and the Compelled Sale Initiating Partner's
right to cause a sale of the Property pursuant to Section 12.3 has expired,
(iii) deliver a Third Party Offer after it has delivered a Proposed Offer until
the Compelled Sale Responding Partner's option under Section 12.2 has expired
without being exercised and the Compelled Sale Initiating Partner's right to
cause a sale of the Property pursuant to Section 12.3 has expired, or (iv)
deliver a Proposed Offer
41
if it is in default under this Agreement. If, after the Compelled Sale
Responding Partner elects to purchase a Property pursuant to Section 12.2, the
Compelled Sale Responding Partner defaults in making the purchase, the Compelled
Sale Responding Partner shall not be permitted to deliver a Proposed Offer or a
Third Party Offer to the Compelled Sale Initiating Partner for a period of 12
months following the date of the default.
SECTION 12.5 THIRD PARTY OFFER. For purposes of this Article 12, the term
------------ ------------------
"Third Party Offer" shall mean a written offer to purchase a Property for a
specified price (grossed up to include the unpaid principal balance of all
Mortgages encumbering the Property and the unpaid principal balance of all other
indebtedness of the Company and the applicable Subsidiary for borrowed money
attributable to such Property) from a financially responsible Person, identified
therein by name and address, who reasonably appears capable of complying with
the terms of the Third Party Offer and who is unrelated, directly or indirectly,
to the Compelled Sale Initiating Partner, and which does not contain terms or
conditions which the Company or relevant Subsidiary, for reasons other than its
financial condition, is not reasonably capable of performing, such as payment in
a specific form of property (such as corporate stock or a unique or specific
item or class of property) not readily available to the Company or relevant
Subsidiary or for which no recognized or adequate public market exists (the
"Purchaser"). The Person who makes the Third Party Offer shall be deemed to be
"unrelated" only if it is not an Affiliate of the Compelled Sale Initiating
Partner (and, in such instance where the General Partner is the Compelled Sale
Initiating Partner, HHMLP or its Affiliate) and there is no arrangement of any
kind whereby the Compelled Sale Initiating Partner, directly or indirectly, will
be financially interested in the ownership of the Property, or any interest
therein.
SECTION 12.6 CASH PRICE. For all purposes of this Article 12, the purchase
----------- -----------
price of the Property shall be deemed to be payable in cash if the purchase
price is payable in part by assuming, or taking title to the Property subject
to, all or any of the existing Mortgages and the balance is payable in cash.
SECTION 12.7 TERMINATION OF PROPERTY MANAGEMENT AGREEMENT.Upon consummation
------------ ---------------------------------------------
of a Proposed Transfer contemplated by this Article 12, if the General Partner
is an Affiliate of the Property Manager, the General Partner shall cause the
termination of the Property Management Agreement with respect to such Property
such that the Property Manager shall have no further rights thereunder with
respect to such Property or that certain Subsidiary which was the record owner
of such Property.
SECTION 12.8 THREE YEAR CONDITION. During the 3 year period of time
------------ ---------------------
immediately following the consummation of the Company's first Approved
Acquisition, no property may be sold pursuant to this Article 12 unless the
Compelled Sale Responding Partner's allocable share of the Minimum Price (based
upon such Partner's Percentage Interest) to be received by the Company hereunder
is in excess (after deduction for such Partners' allocable share of all costs
and expenses incurred by the Company directly in connection with the sale of
such Property) of the aggregate Unreturned Capital Contributions of such Partner
with respect to such Property.
42
ARTICLE 13
SPECIAL RIGHTS OF LIMITED PARTNER UNITS
SECTION 13.0 EXCHANGEABILITY. Limited Partner Units shall, subject to
------------ ----------------
Section 13.0(a) below and as described in Section 13.1(b), be exchangeable for
Partnership Units of HLP under HLP's Amended and Restated Agreement of Limited
Partnership (the "OP Partnership Units") and, subject to Section 13.0(b) below
and as described in Section 13.1(a), be exchangeable for Class A Common Shares
(the "Exchange Rights") until the earliest to occur of the following: (i) such
time as the General Partner's Partnership Interest is acquired in full by the
Limited Partner, pursuant to Section 13.0(a)(z), (ii) the Transfer by HLP of all
of its General Partnership Interest in accordance with Articles 8, 10 or 11 of
this Agreement, and (iii) HLP's otherwise ceasing to be the General Partner,
with the consent of the Limited Partner. The Exchange Rights shall not be
exercisable at any time during the pendency of a buy/sell process, once
initiated by the Limited Partner under Article 11 hereof.
(a) If delivery to or ownership of OP Partnership Units by a
holder of Limited Partner Units (regardless of whether or not such holder of
Limited Partner 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 result in:
(i) such holder of Limited Partner 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), units
representing an interest in 25% or more of the capital, profits or net
assets of HLP, 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
43
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,
then the Exchange Right shall be exercisable, at the sole discretion of such
holder of Limited Partner Units, into a right to receive or acquire, as
applicable, in lieu of that number of OP Partnership Units to the extent
necessary to prevent the situation described in (i) and (ii) above, either,
(x) Class A Common Shares, as described in Section 13.1(a), or
(y) a note issued by the Company (and secured by a priority lien on all of
the Company's assets, to the extent not prohibited by any agreement to
which the Company is a party or by which the Properties are bound, and if
not permitted, then a lien on all of the Company's assets, subordinate only
to such liens as then exist on the Company's assets that do not permit a
priority lien) in redemption of such holder's tendered Limited Partner
Units with a principal amount equal to the amount such holder of Limited
Partner units would receive in the event the Company were to sell all its
assets and, after paying all of its debts and liabilities as required
pursuant to the terms hereof (the "Redemption Amount"), distributed the net
proceeds of such sale to the Partners pursuant to the provisions of Section
12.3(b) hereof, payable in accordance with Section 13.3 hereof, and shall
accrue interest at a rate of 10.5% per annum, or
(z) all of the General Partner's Partnership Interest, for a note payable
to the General Partner by the Limited Partner with a principal amount equal
to the amount the General Partner would receive with respect to such
transferred interest in the event the Company were to sell all of its
assets and, after paying all of its debts and liabilities as required
pursuant to the terms thereof and distributed the net proceeds of such sale
to the Partners pursuant to the provisions of Section 12.3(b) hereof,
payable in accordance with Section 13.3 hereof, and shall accrue interest
at a rate of 10.5% per annum (the consideration described in (y) and (z)
above, hereinafter referred to as the "Redemption Consideration"). The
Exchange Rights will terminate upon exercise of the Limited Partner of its
rights under this paragraph.
(b) Notwithstanding the provisions of Section 13.0(a) above, if
delivery to or ownership of Class A Common Shares by such holder of Limited
Partner Units (whether or not such holder of Limited Partner Units has, in fact,
exercised its Exchange Rights, and taking into
44
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 result in such holder of Limited Partner 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) shares of HT in excess of:
(i) the "Excepted Holder Limit" (as set forth in that certain Excepted
Holder Agreement by and between CNL Hospitality Partners, L.P. and HT,
dated as of April 21, 2003); or
(ii) the "Ownership Limit" (as set forth in the Declaration of Trust
of HT, as amended, and calculated in accordance therewith, except as
otherwise provided in the Declaration of Trust of HT, as amended, but
without regard to the Excepted Holder Agreement), which ownership
would cause (A) HT to satisfy the provisions of paragraph (a)(ii)(A)
above of this Section 13.0, or (B) one or more persons to satisfy the
provisions of paragraph (a)(ii)(B) above of this Section 13.0,
then the Exchange Right shall, subject to the provisions of the next sentence,
be exercisable, at the sole discretion of such holder of Limited Partner Units,
in lieu of that number of Class A Common Shares necessary to prevent the
situation described in (i) and (ii) above solely into the right to receive the
Redemption Consideration. If the Limited Partner exercises its Exchange Rights
pursuant to Sections 13.1(a) or 13.1(b) hereof and the amount of Limited Partner
Units that cannot be exchanged for Class A Shares and/or OP Units pursuant to
Sections 13.0(a) and 13.0(b) hereof, as applicable, represents a Partnership
Interest of less than 5%, then with respect to such Partnership Units, the
Limited Partner may only elect that Redemption Consideration set forth in
Section 13.0 (a)(y) and not that Redemption Consideration set forth in
13.0(a)(z).
(c) Redemption Consideration described herein shall be delivered in the
manner set forth in Sections 13.2, 13.3 and 13.4 hereof.
SECTION 13.1. MECHANICS.
-------------------------
(a) Exchange into Class A Common Shares.
-----------------------------------
(i) Subject to and in compliance with the provisions of this
Section, the holder of Limited Partner Units may, at the option of such holder,
exchange at any time all but not less than all (except as set forth in Section
13.0 or unless the General Partner consents to "less than all") of such holder's
Limited Partner Units into fully paid and nonassessable shares of Class A Common
Shares. The number of shares of Class A Common Shares to which a holder of
Limited Partner Units shall be entitled to receive upon exchange shall be the
number obtained by dividing the (x) Exchange Amount (calculated in accordance
with Section 13.1(c) below), by (y) the Share Exchange Price (as defined in
Section 13.1(a)(ii) below).
(ii) The price at which Limited Partner Units will be
exchanged for Class A Common Shares shall be equal to $6.7555 (as adjusted as
hereinafter provided, the "Share Exchange Price"). All references to the Share
Exchange Price herein shall mean the Share Exchange Price as so adjusted.
45
(b) Exchange into OP Partnership Units.
----------------------------------
(i) Subject to and in compliance with the provisions of this
Section, the holder of Limited Partner Units may, at the option of such holder,
exchange at any time all but not less than all (unless the General Partner
consents to "less than all") of such holder's Limited Partner Units into OP
Partnership Units. The number of OP Partnership Units which a holder of Limited
Partner Units shall be entitled to receive upon exchange shall be the number
obtained by dividing the (x) Exchange Amount (calculated in accordance with
Section 13.1(c) below), by (y) the OP Partnership Unit Exchange Price (as
defined in Section 13.1(b)(ii) below).
(ii) The price at which OP Partnership Units will be
exchanged for Limited Partner Units shall be equal to $6.7555 (as adjusted as
hereinafter provided, the "OP Partnership Unit Exchange Price"). All references
to the OP Partnership Unit Exchange Price herein shall mean the OP Partnership
Unit Exchange Price as so adjusted.
(c) The Exchange Amount for Limited Partner Units to be exchanged
pursuant to this Article 13 shall be equal to all Capital Contributions made
with respect to such Limited Partner Units, less the Allocable Return of Capital
(as defined hereinafter) with respect to such Limited Partner Units. For the
purposes of this Article 13, the "Allocable Return of Capital" shall mean the
sum of all prior distributions of Capital Proceeds pursuant to Section
12.3(b)(i) hereof with respect to such Limited Partner Units and all liquidating
distributions pursuant to Section 15.3(c) hereof with respect to such Limited
Partner Units, in an aggregate amount not to exceed the Property Acquisition
Contributions made with respect to such Limited Partner Units relating to
Properties that have been sold prior to the date of such exchange.
(d) The Exchange Rights in this Section 13.1 shall be exercised by
the holder of Limited Partner Units by giving written notice that such holder
elects to exchange all of its Limited Partner Units into Class A Common Shares
or OP Partnership Units, and by delivery of an executed form of assignment in
form and substance reasonably satisfactory to the General Partner, for such
Limited Partner Units to be so exchanged to HT at its principal office (or such
other office or agency of HT as HT may designate by notice in writing to the
holder or holders of the Limited Partner 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 applicable
laws, Article VII of that certain Declaration of Trust of HT, as amended, and
HLP's Amended and Restated Agreement of Limited Partnership, as the case may be,
to the extent such designation shall involve a transfer, in which the
certificate or certificates for shares of Class A Common Shares or OP
Partnership Units shall be issued. Promptly after the receipt by HT of the
written notice referred to in this Section 13.1(d) and surrender of the
certificate or certificates for the Limited Partner Units to be converted, HT
shall cause to be issued and delivered, to the holder, within five (5) Business
Days, registered in such name or names as such holder may direct, subject to
compliance with applicable laws and Article VII of that certain Declaration of
Trust of HT, as amended, and HLP's Amended and Restated Agreement of Limited
Partnership, as the case may be, to the extent such designation shall involve a
transfer, a certificate or certificates for the number of whole shares or units
of Class A Common Shares or OP Partnership Units, issuable upon the exchange of
such Limited Partner 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 HT
46
and at such time the rights of the holder of such Limited Partner Units shall
cease, and the person or persons in whose name or names any certificate or
certificates for Class A Common Shares or OP Partnership Units shall be issuable
upon such exchange shall be deemed to have become the holder or holders of
record of the shares or units represented thereby.
(b) If HT or HLP, as the case shall be, shall, at any time or from
time to time after April 21, 2003, effect a subdivision of the outstanding Class
A Common Shares or OP Partnership Units without the Company effecting a
corresponding subdivision of the Limited Partner Units, the Share Exchange Price
or OP Partnership Unit Exchange Price, as applicable, in effect immediately
before that subdivision shall be proportionately decreased. Conversely, if HT
or HLP, as the case shall be, shall, at any time or from time to time after
April 21, 2003, combine the outstanding Class A Common Shares or OP Partnership
Units into a smaller number of shares or units, without the Company effecting a
corresponding combination of the Limited Partner Units, the Share Exchange Price
or OP Partnership Unit Exchange Price, as applicable, in effect immediately
before the combination shall be proportionately increased. Any adjustment under
this Section 13.1(e) shall become effective at the close of business on the date
the subdivision or combination becomes effective.
(c) If, at any time or from time to time after April 21, 2003, the
Class A Common Shares or OP Partnership Units issuable upon the exchange of the
Limited Partner Units are changed into the same or a different number of shares
or units of any class or classes of shares or units, as the case may be, whether
by recapitalization, reclassification or otherwise (other than a subdivision or
combination of shares or units or share dividend or distribution or a
reorganization, merger, consolidation or sale of assets provided for elsewhere
in this Article 13), each holder of Limited Partner Units shall have the right
thereafter to exchange such units into the kind and amount of shares or units
and other securities and property receivable upon such recapitalization,
reclassification or other change by holders of the maximum number of Class A
Common Shares or OP Partnership Units into which such Limited Partner Units
could have been 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.
(d) If, at any time or from time to time after April 21, 2003
there is a capital reorganization, merger, consolidation or sale of all or
substantially all of the assets of HT or HLP, affecting the Class A Common
Shares or OP Partnership Units (other than a recapitalization, subdivision,
combination, reclassification, exchange or substitution of shares or units
provided for elsewhere in this Article 13), as a part of such capital
reorganization, provision shall be made so that the holders of the Limited
Partner Units shall thereafter be entitled to receive upon exchange of the
Limited Partner Units the number of shares of stock, units or other securities
or property to which a holder of the number of Class A Common Shares or OP
Partnership Units deliverable upon exchange would have been entitled on such
transaction, subject to further adjustment as provided herein or with respect to
such other shares, units or other securities by the terms thereof. In any such
case, appropriate adjustment shall be made in the application of the provisions
of this Article 13 with respect to the rights of the holders of Limited Partner
Units after such transaction such that the provisions of this Section 13.1(g)
(including adjustment of the Share Exchange Price or OP Partnership Unit
Exchange Price, as the case may be, then in effect and the number of shares or
units issuable upon exchange of the
47
Limited Partner Units) shall be applicable after that event and be as nearly
equivalent as practicable.
(e) (i) If, at any time or from time to time after April 21, 2003,
HT issues or sells, or is "deemed" by the express provisions of this Section
13.1(h)(i) to have issued or sold, Additional HT Common Shares (as defined in
Section 13.1(h)(iv) below), other than (A) as a dividend or other distribution
on any class of shares, (B) pursuant to a subdivision or combination of HT
Common Shares as provided in Section 13.1(f) above, (C) pursuant to any employee
benefit plan approved by HT's Board of Trustees which plan shall issue, in the
aggregate, no more than 650,000 HT Common Shares (D) pursuant to a plan
providing for the issuance of additional HT Common Shares upon reinvestment of
dividends and additional optional amounts under such plan where the dividends
are reinvested at an amount per share of HT Common Share issued thereunder that
is equal to or greater than 95% of the fair market value of such HT Common Share
or (E) upon exchange of partnership interests in HLP pursuant to and in
accordance with Section 8.05 of the HLP Amended and Restated Agreement of
Limited Partnership, for an Effective Price (as defined in Section 13.1(h)(iv)
below) less than eighty-five percent (85%) of the then effective Share Exchange
Price, then and in each such case, the then existing Share 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 Share 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 Section 13.1(h)(ii)) by HT for the total number of
Additional HT Common Shares so issued would purchase at such Share 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
Limited Partner Units could be 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 conversion of all other rights, options and convertible
securities outstanding on the day immediately preceding the given date as set
forth in Section 13.1(h)(ii) below.
(ii) For the purpose of making any adjustment required under
this Article 13, the consideration received by HT for any issue or sale of
securities shall (A) to the extent it consists of cash, be computed at the
net amount of cash received by HT after deduction of any underwriting or
similar discount commission, compensation or concessions paid or allowed by
HT in connection with such issue or sale but without deduction of any
expenses payable by HT, (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 HT's Board of Trustees, and (C) if Additional HT Common
Shares, Convertible Securities (as defined in Section 13.1(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 HT for a consideration which covers both, be
computed as the portion of the consideration so received that may be
reasonably
48
determined in good faith by HT'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 13.1(h), if HT 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
Share Exchange Price, then in each such case, HT 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 conversion 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 HT 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 HT upon
the exercise of such rights or options, plus, in the case of Convertible
Securities, the minimum amount of consideration, if any, payable to HT
(other than by cancellation of liabilities or obligations evidenced by such
Convertible Securities) upon the conversion thereof;
provided that if in the case of Convertible Securities the minimum amount
of such consideration cannot be ascertained, but is a function of antidilution
or similar protective clauses, HT 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
HT upon the exercise or conversion 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 antidilution 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
HT upon the exercise or conversion 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 HT
upon the exercise or conversion of such rights, options or Convertible
Securities. No further adjustment of the Share 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 conversion of any such Convertible
Securities. If any such rights or options or the conversion privilege
represented by any such Convertible Securities shall expire without having been
exercised, the Share Exchange Price as adjusted upon the issuance of such
rights, options or Convertible Securities shall be readjusted to the Share
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 conversion of such Convertible Securities,
and such Additional HT Common Shares, if any, were issued or sold for the
consideration actually received by HT upon such exercise, plus the
consideration, if any, actually received by HT for the granting of all such
rights or options,
49
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 HT (other than by cancellation of liabilities or
obligations evidenced by such Convertible Securities) on the conversion of such
Convertible Securities.
(iv) "HT Common Shares" shall mean and include Class A Common
Shares, as constituted on the date of filing of the Certificate, provided,
however, that such term, when used to describe the securities receivable
upon exchange of the Limited Partner Units, shall include only shares
designated as HT Common Shares on the date of filing of the Certificate of
Limited Partnership, any shares resulting from any combination or
subdivision thereof referred to in Section 13.1(f), or in case of any
reorganization or reclassification of the outstanding shares thereof, the
stock, securities or assets provided for in Section 13.1(g)). "Additional
HT Common Shares" shall mean all HT Common Shares issued by HT or deemed to
be issued pursuant to this Section 13.1(h)(iv), whether or not subsequently
reacquired or retired by HT. 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 HT for such
issuance or sale or deemed issuance or sale under this Section 13.1(h)(iv),
for such Additional HT Common Shares by the total number of Additional HT
Common Shares issued or sold, or deemed to have been issued or sold by HT
under this Section 13.1(h)(iv).
(v) If HT proposes to issue or sell Additional Shares of HT
Common Shares for an Effective Price that is less than eighty-five percent (85%)
of the Share Exchange Price and such issuance or sale will result in a reduction
of the Share Exchange Price pursuant to this Section 13.1 (an "AMEX Dilutive
Issuance"), then the AMEX Dilutive Issuance and the resulting potential issuance
of Additional HT Common Shares upon exchange of the Limited Partner Units at an
Share Exchange Price below the initial Share Exchange Price, must be approved by
the shareholders of HT 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 conversion of
the Limited Partner Units at an Share Exchange Price below the initial Share
Exchange Price, as required to be approved by the preceding sentence, then HT
shall not consummate the AMEX Dilutive Issuance in any manner that would cause a
reduction of the Share Exchange Price pursuant to this Section 13.1.
(f) In each case of an adjustment or readjustment of the Share
Exchange Price for the number of Class A Common Shares, OP Partnership Units or
other securities issuable upon exchange of the Limited Partner Units, if the
Limited Partner Units are then exchangeable pursuant to this Article 13, HT, 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 Limited Partner Units at such holder's
address as shown in the Company'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 HT for any Additional Class A
Common Shares issued or sold or deemed to have been issued or sold, (ii) the
Share Exchange Price in
50
effect at the time, (iii) the number of Additional Class A 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
Limited Partner Units.
(g) Notwithstanding anything herein to the contrary, no adjustment
of the Share Exchange Price shall be made pursuant to this Article 13 in an
amount less than $.01 per Limited Partner Unit, 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 Limited Partner Unit or more.
(h) Upon (i) any taking by HT of a record of the holders of any
class of securities of HT for the purpose of determining the holders thereof who
are entitled to receive any dividend or other distribution, or (ii) any
Acquisition (as defined in Section 15.1(a)(i)(A)) or other capital
reorganization of HT, any reclassification or recapitalization of the capital
stock of HT, any merger or consolidation of HT with or into any other entity, or
any Asset Transfer (as defined in Section 15.1(a)(i)(B)), or any voluntary or
involuntary dissolution, liquidation or winding up of HT, HT shall mail to each
holder of Limited Partner 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 dividend or distribution and a description
of such dividend or 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 Class A Common Shares (or other securities) shall be entitled to
exchange their 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.
(i) No fractional Class A Common Shares shall be issued upon the
exchange of Limited Partner Units. All Class A Common Shares (including
fractions thereof) issuable upon the exchange of the Limited Partner Units by a
holder thereof shall be aggregated for purposes of determining whether the
exchange would result in the issuance of any fractional shares. If, after the
aforementioned aggregation, the exchange would result in the issuance of any
fractional shares, HT shall, in lieu of issuing any fractional shares, pay cash
equal to the product of such fraction multiplied by the Class A Common Shares'
fair market value per share on the date of exchange (as reported by the American
Stock Exchange, on which the Class A Common Shares are then listed for trading,
or if none, the most recently reported "over the counter" trade price).
(j) HT shall at all times reserve and keep available out of its
authorized but unissued Class A Common Shares, solely for the purpose of
effecting the exchange of the Limited Partner Units, such number of its Class A
Common Shares as shall from time to time be sufficient to effect the exchange of
all Limited Partner Units. If at any time the number of authorized but unissued
Class A Common Shares shall not be sufficient to effect the exchange of all
Limited Partner Units, HT 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 Class A Common Shares to such
number of shares as shall be sufficient for such purpose.
51
(k) Any notice required by the provisions of this Article 13 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 Company.
(l) HT shall pay any and all stamp, transfer and other similar
taxes payable or determined to be payable in connection with the issuance of the
Class A Common Shares issuable upon the exchange of the Limited Partner Units.
(m) It shall be a condition to the exercise of the Exchange Rights
that each proposed registered holder of the Class A Common Shares or OP
Partnership Units shall have executed and delivered to HT or HLP, as applicable,
an undertaking to reimburse HT or HLP for the amount of any "unearned dividends
or distributions" with respect to such securities. 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 paid on the
Class A Common Shares or Series A Preferred 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 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
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 Class A Common Shares or OP Partnership Units may bear a legend
referring to the provisions of this clause and such undertaking, which shall be
binding on any transferee of such securities.
SECTION 13.2 DETERMINATION OF FAIR MARKET VALUE
----------------------------------
(a) In connection with an election to receive Redemption Consideration
set forth in Section 13.0 hereof, upon delivery of a note thereunder to the
General Partner or Limited Partner, as the case may be, the party delivering the
note (the "Section 13 Initiating Partner") shall promptly cause an appraisal of
-----------------------------
the fair market value of the Company for purposes of fixing the principal amount
of said note. The principal balance of such note shall equal the product
arrived at by multiplying the fair market value of the Company, as determined in
Section 13.2(b) below, by the Percentage Interest associated with the
Partnership Units for which Redemption Consideration is being delivered under
Section 13.0(a)(y) or 13.0(a)(z) above.
(b) The fair market value of the Company shall be determined by
appraisal in accordance with the following: (i) an appraiser shall be chosen by
the Section 13 Initiating Partner, the determination of which shall be subject
to the consent of the party receiving the note (the "Target Partner"), which
--------------
consent shall not be unreasonably withheld; (ii) the appraiser shall be a member
of the Appraisal Institute or any organization successor thereto; (iii) within
(15) days after receipt of the Section 13 Initiating Partner's notice of the
appointment of the appraiser,
52
the Section 13 Initiating Partner shall cause the appraiser to commence his/her
appraisal of the fair market value of the Company. The appraiser appointed
pursuant to this Section shall be a disinterested person of recognized
competence who has had a minimum of ten (10) years experience in appraising
commercial real estate in the states in which the Property(ies) are located. The
appraiser shall determine the fair market value of the Company on the basis of
all relevant factors affecting fair market value. The cost and expense of the
appraiser and the appraisal process shall be borne by the Company.
SECTION 13.3 PAYMENT OF NOTE/SALE OF PROPERTY.
--------------------------------
(a) Promptly after the determination of the fair market value of the
Company in accordance with Section 13.2 above, the Company or the Section 13
Initiating Partner, as the case may be, shall either (x) pay in full the
principal of the note, together with accrued interest thereon, or (y) cause the
applicable Subsidiary(ies) to sell Property(ies) in connection with a "Suitable
Offer" for a purchase price payable in cash (within the meaning of Section
13.3(c)) equal to or greater than the principal amount of the note together with
an amount reasonably anticipated to be the accrued interest thereon at the
anticipated closing of the sale of the Property(ies) hereunder, the unpaid
principal balance of all Mortgages encumbering the Property(ies) and the unpaid
principal balance of all other indebtedness of the Company and the applicable
Subsidiary(ies) for borrowed money attributable to such Property(ies) and apply
the proceeds from such sale, to repay the principal of the note, together with
accrued interest thereon, on the date(s) such Property(ies) are sold and to
repay such amount in full on the date the last Property(ies) are sold. Until
such time as the note is paid in full, the Section 13 Initiating Partner and the
Company shall deliver, on a timely basis, to the other Partner, all information,
materials, data, timetables, etc. relating to the sale of the Property(ies) and
the Company; it being the intent of the parties hereto that the Target Partner
be kept fully informed of the operation of the Company and the sale referred to
herein.
(b) For purposes of this Section 13.3, the term "Suitable Offer" shall
mean a written offer to purchase the Property(ies) referred to in this Section
13.3 for a specified price from a financially responsible Person, identified
therein by name and address, who reasonably appears capable of complying with
the terms of the Suitable Offer, and which does not contain terms or conditions
which the Company or the relevant Subsidiary(ies), is/are not reasonably capable
of performing.
(c) For purposes of this Section 13.3, the purchase price for the
Property(ies) referred to in this Section 13.3 shall be deemed to be payable in
cash if the purchase price is payable in part by assuming, or taking title to
the Property(ies) subject to, all or any of the existing Mortgages and the
balance is payable in cash, provided that the amount of cash is sufficient to
satisfy the principal amount of the note referred to in this Section 13.3
together with an amount reasonably anticipated to be the accrued interest
thereon at the anticipated closing of the sale of the Property(ies) hereunder.
SECTION 13.4 RELEASE FROM LIABILITY
----------------------
In addition, as a condition to any Partner becoming a Section 13
Initiating Partner, such Partner shall arrange for the specific release of the
Target Partner and/or any Affiliates of
53
the Target Partner from the primary liability (as opposed to continuing
liabilities, such as environmental liabilities, which cannot be released) to any
Institutional Lenders having outstanding loans to the Company (including the
cancellation and return of all guarantees, letters of credit, and other security
or assurances posted or made by the Target Partner or any Affiliates of the
Target Partner).
ARTICLE 14
CONFIDENTIALITY
SECTION 14.1 The terms of this Agreement, and all other business, financial or
------------
other information relating directly to the conduct of the business and affairs
of the Company, any Subsidiary or the relative or absolute rights or interests
of any of the Partners (collectively, the "Confidential Information") that has
not been publicly disclosed pursuant to authorization by the Partners is
confidential and proprietary information of the Company and the Partners, the
disclosure of which would cause irreparable harm to the Company, any Subsidiary
and the non-disclosing Partner. Accordingly, each Partner represents that it
has not and agrees that it will not and will direct its members, shareholders,
partners, directors, officers, agents, advisors and Affiliates not to, disclose
to any Person any Confidential Information or confirm any statement made by
third Persons regarding Confidential Information until the Company has publicly
disclosed the Confidential Information pursuant to consent by the non-disclosing
Partner and has notified each Partner that it has done so; provided, however,
that any Partner (or its Affiliates) may disclose such Confidential Information
(i) if required by applicable law or rule of any stock exchange, provided that
before making any disclosure of Confidential Information required by law or rule
of any stock exchange, such disclosing Partner will notify the other Partners
and provide them with a copy of the proposed disclosure containing such
Confidential Information and an opportunity to comment thereon before the
disclosure is made, (ii) as reasonably necessary in connection with any
transaction authorized pursuant to the terms of this Agreement.
SECTION 14.2 Subject to the provisions of Section 14.1, each Partner agrees not
------------
to disclose any Confidential Information to any Person (other than a Person
agreeing to maintain all Confidential Information in strict confidence or a
judge, magistrate or referee in any action, suit or proceeding relating to or
arising out of this Agreement or otherwise) or use any Confidential Information
other than in connection with its performance under this Agreement and the
transactions contemplated by the Securities Purchase Agreement, and to keep
confidential all documents (including, without limitation, responses to
discovery requests) containing any Confidential Information. Each Partner
hereby consents in advance to any motion for any protective order brought by any
other Partner represented as being intended by the movant to implement the
purposes of this Article 14 provided that, if a Partner receives a request to
disclose any Confidential Information under the terms of a valid and effective
order issued by a court or governmental agency and the order was not sought by
or on behalf of or consented to by such Partner, then such Partner may disclose
the Confidential Information to the extent required if the Partner as promptly
as practicable notifies each of the other Partners of the existence, terms and
circumstances of the order, consults in good faith with each of the other
Partners on the advisability of taking legally available steps to resist or to
narrow the order, and if disclosure of the Confidential Information is required,
exercises its best efforts to obtain a protective order or other reliable
assurance that confidential treatment will be accorded to the portion of the
54
disclosed Confidential Information that any other Partner designates. The cost
(including, without limitation, attorneys' fees and expenses) of obtaining a
protective order covering Confidential Information designated by such other
Partner will be borne by the Company.
SECTION 14.3 The covenants contained in this Article 14 will survive the
------------
Transfer of the Partnership Interests of any Partner, the termination of this
Agreement and/or the dissolution of the Company.
ARTICLE 15
DISSOLUTION OF COMPANY
SECTION 15.1 EVENTS CAUSING DISSOLUTION
------------ --------------------------
(a) The Company shall be dissolved and its affairs wound up upon
the occurrence of any of the following events:
(1) (A) the acquisition of the Company by another entity 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
Company) in which Percentage Interests of the Company are exchanged for
securities or other consideration issued, or caused to be issued by the
acquiring entity or its subsidiary (an "Acquisition"), or (B) a sale, lease,
-----------
exchange or other transfer (in one transaction or a series of transactions) of
all or substantially all of the assets of the Company (an "Asset Transfer")
unless in each case the holders of the Partnership Interests as constituted
immediately prior to such Acquisition or sale will, immediately after such
Acquisition or sale (by virtue of securities issued as consideration for the
Company's Acquisition or sale or otherwise) hold at least 50% of the voting
power of the surviving, continuing or purchasing entity, or (ii) provided,
however, that if, in connection with such sale or other disposition, the Company
receives a promissory note or notes evidencing all or a part of the purchase
price of such assets, the Company shall not be dissolved until such promissory
note(s) is (are) satisfied, sold or otherwise disposed of; or
(2) the consent in writing by the Partners, acting
unanimously, that the Company shall be dissolved.
(b) The Company shall not be dissolved by the resignation,
withdrawal, bankruptcy or dissolution of a Partner and the Company's business
shall continue pursuant to Section 17-801 of the Act. In the event of the
withdrawal of the General Partner, within 90 days after such withdrawal, the
Limited Partner shall appoint, effective as of the date of the withdrawal, a
replacement general partner or general partners for the Company by the
affirmative vote of the Limited Partners owning at least fifty-one percent (51%)
of the total Percentage Interests of all Limited Partners.
SECTION 15.2 WINDING UP. If the Company is dissolved, the General Partner
------------ -----------
shall proceed with dispatch and without any unnecessary delay to sell or
otherwise liquidate all property of the Company. Any act or event (including
the passage of time) causing a dissolution of the Company shall in no way affect
the validity of, or shorten the term of, any lease, contract or
55
other obligation entered into by or on behalf of the Company. The full rights,
powers and authorities of the General Partner shall continue so long as
appropriate and necessary to complete the process of winding up the business and
affairs of the Company.
SECTION 15.3 APPLICATION OF ASSETS IN WINDING UP.Except as otherwise
------------ ------------------------------------
provided in Section 15.1, upon the occurrence of an event described in Section
15.1, the Company shall continue solely for the purposes of winding up its
affairs in an orderly manner, liquidating its assets, and satisfying the claims
of its creditors and Partners. No Partner shall take any action that is
inconsistent with, or not necessary to or appropriate for, the winding up of the
Company's business and affairs. The General Partner (or in the event there is
no General Partner, any Partner elected by the Limited Partners holding a
majority of the Percentage Interests) shall be responsible for overseeing the
winding up and dissolution of the Company and shall take full account of the
Company's liabilities and assets and the assets shall be liquidated as promptly
as is consistent with obtaining the fair value thereof, and the proceeds
therefrom, to the extent sufficient therefor, shall be applied and distributed
in the following order:
(a) first, to pay any debts or liabilities of the Company and the
Subsidiaries and then to pay, if applicable, the costs and expenses of winding
up and terminating the Company and the Subsidiaries;
(b) next, to establish any reserves which the General Partner
reasonably determines to be necessary to provide for any contingent or
unforeseen liabilities or obligations of the Company and the Subsidiaries (as
the General Partner reasonably determines to be advisable);
(c) The balance, if any, to the Partners in accordance with their
positive Capital Account balances in compliance with Treasury Regulations
Section 1.704-1(b)(2)(ii)(b)(2).
-
Notwithstanding anything to the contrary, in the event the General
Partner's interest in the Partnership is "liquidated" within the meaning of
Treasury Regulations Section 1.704-1(b)(2)(ii)(g) (including, without
-
limitation, upon the liquidation of the Partnership) and the General Partner's
Capital Account has a deficit balance after giving effect to all contributions
distributions and allocations for all taxable years, including the year during
which such liquidation occurs, the General Partner shall contribute to the
capital of the Partnership the amount necessary to restore such deficit balance
to zero in compliance with Treasury Regulations Section 1.704-1(b)(2)(ii)(b)(3).
-
If the Limited Partner has a deficit balance in its Capital Account (after
giving effect to all contributions, distributions and allocations for all
taxable years, including the year during which such liquidation occurs), such
Partner shall have no obligation to make any contribution to the capital of the
Company with respect to such deficit, and such deficit shall not be considered a
debt owed to the Company or to any other Person for any purpose whatsoever.
SECTION 15.4 NEGATIVE CAPITAL ACCOUNTS. If, after the allocation of the
------------ --------------------------
Profit or Loss from a Capital Transaction involving the sale or disposition of
all or substantially all of the assets of the Company or the Subsidiaries (a
"Terminating Capital Transaction") pursuant to Section 5.3 and
-------------------------------
56
the distribution of the Capital Proceeds from the Terminating Capital
Transaction among the Partners and upon final liquidation of the Company, the
Capital Account of the Limited Partner is negative, such Partner shall not be
obligated to restore to any extent the negative balance in its Capital Account.
SECTION 15.5 TERMINATION. The Company shall terminate, except for the
------------ ------------
purpose of suits, other proceedings, and appropriate action as provided in the
Act, when all of its property or each of its Subsidiary's properties shall have
been disposed of and the net proceeds and liquid assets, after satisfaction of
liabilities to Company creditors, shall have been distributed among the
Partners. The General Partner shall have authority to distribute any Company
property discovered after dissolution, convey real estate, and take such other
action as may be necessary on behalf of and in the name of the Company.
ARTICLE 16
MISCELLANEOUS PROVISIONS
SECTION 16.1 AMENDMENT AND MODIFICATION. This Agreement may not be amended
------------ ---------------------------
or modified except by an instrument in writing signed by all of the parties
hereto.
SECTION 16.2 PARTIES IN INTEREST.This Agreement shall be binding upon and,
------------ --------------------
except as provided below, inure solely to the benefit of each party hereto and
their successors, assigns and transferees, and nothing in this Agreement,
express or implied, is intended to confer upon any other Person any rights or
remedies of any nature whatsoever under or by reason of this Agreement.
SECTION 16.3 NOTICES.All notices and other communications hereunder shall be
------------ --------
in writing and shall be deemed given if delivered personally, telecopied, or
mailed by registered or certified mail (return receipt requested), or sent by
Federal Express or other recognized overnight courier, to the parties at the
following addresses (or at such other address for a party as shall be specified
by like notice):
(a) If to the Limited Partner, to:
CNL Hospitality Properties, Inc.
CNL Center at City Commons
000 Xxxxx Xxxxxx Xxxxxx
Xxxxxxx, Xxxxxxx 00000-0000
Facsimile: 000-000-0000
57
Attn: Xxxxx Xxxxxxxxxx
with a copy (which shall not constitute notice hereunder) to:
Xxxxxxxxx Traurig, LLP
The MetLife Building
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Facsimile: 212-801-6400
Attn: Xxxxxx Xxxxx, Esq.
Xxxx X. Xxxxxx, Esq.
(b) If to the General Partner, to:
Hersha Hospitality Limited Partnership
000 Xxxxxxxx Xxxxx
Xxx X
Xxx Xxxxxxxxxx, Xxxxxxxxxxxx 00000
Facsimile: 000-000-0000
Attn: Xxxx X. Xxxx
with a copy (which shall not constitute notice) to:
Hunton & Xxxxxxxx
000 Xxxx Xxxx Xxxxxx
Xxxxxxxx, Xxxxxxxx 00000
Facsimile: 804-788-8218
Attn: Xxxxxxx X. Xxxxx, Esq.
Xxxxxxx X. Xxxxx, Esq.
Any of the above addresses may be changed at any time by notice given as
provided above; provided, however, that any such notice of change of address
shall be effective only upon receipt. All notices, requests or instructions
given in accordance herewith shall be deemed received on the date of delivery,
if hand delivered, on the date of receipt, if telecopied, three Business Days
after the date of mailing, if mailed by registered or certified mail, return
receipt requested, and one Business Day after the date of sending, if sent by
Federal Express or other recognized overnight courier.
SECTION 16.4 COUNTERPARTS. This Agreement may be executed and delivered
------------ -------------
(including by facsimile transmission) in one or more counterparts, all of which
shall be considered one and the same agreement and shall become effective when
one or more counterparts have been signed by each of the parties and delivered
to the other parties, it being understood that all parties need not sign the
same counterpart.
SECTION 16.5 ENTIRE AGREEMENT. This Agreement constitutes the entire
------------ -----------------
agreement of the parties hereto and supersedes all prior agreements, letters of
intent and understandings, both written and oral, among the parties with respect
to the subject matter hereof.
58
SECTION 16.6 GOVERNING LAW; CHOICE OF FORUM. This Agreement shall be
------------ -------------------------------
construed in accordance with and governed by the internal laws of the State of
New York. Each of the parties hereto hereby irrevocably consents, to the
maximum extent permitted by law, that any action or proceeding relating to this
Agreement or the transactions contemplated hereby shall be brought, at the
option of the party instituting the action or proceeding, in any court of
general jurisdiction in New York County, New York, in the United States District
Court for the Southern District of New York or in any state or federal court
sitting in the area currently comprising the Southern District of New York.
Each of the parties hereto waives any objection that it may have to the conduct
of any action or proceeding in any such court based on improper venue or forum
non conveniens, waives personal service of any and all process upon it, and
consents that all service of process may be made by mail or courier service
directed to it at the address set forth herein and that service so made shall be
deemed to be completed upon the earlier of actual receipt or ten days after the
same shall have been posted or delivered to a nationally recognized courier
service. Nothing contained in this Section 16.6 shall affect the right of any
party hereto to serve legal process in any other manner permitted by law.
SECTION 16.7 PUBLIC ANNOUNCEMENTS. Each Partner shall consult with each
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other before issuing any press release or otherwise making any public statements
with respect to this Agreement or the transactions contemplated hereby, except
for statements required by law or by any listing agreements with any national
securities exchange or the National Association of Securities Dealers, Inc., or
made in disclosures filed pursuant to the Securities Act of 1933, as amended and
the regulations thereunder or the Securities Exchange Act of 1934, as amended
and the rules thereunder.
SECTION 16.8 HEADINGS. The headings of this Agreement are for convenience of
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reference only and are not part of the substance of this Agreement.
SECTION 16.9 ARTICLES, SECTIONS. Unless the context indicates otherwise,
------------ -------------------
references to Articles, Sections and paragraph, shall refer to the corresponding
article, section and paragraph in this Agreement.
SECTION 16.10 BINDING EFFECT. This Agreement shall be binding upon, and
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inure to the benefit of, the parties hereto and their respective successors and
assigns.
SECTION 16.11 JURY TRIAL WAIVER. EACH PARTNER HEREBY WAIVES SUCH PARTNER'S
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RIGHTS TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING BASED UPON, OR RELATED TO,
THE SUBJECT MATTER OF THIS AGREEMENT AND THE BUSINESS RELATIONSHIP THAT IS BEING
ESTABLISHED. THIS WAIVER IS KNOWINGLY, INTENTIONALLY AND VOLUNTARILY MADE BY
EACH PARTNER. EACH PARTNER ACKNOWLEDGES THAT NO PERSON HAS MADE ANY
REPRESENTATIONS OF FACT TO INDUCE THIS WAIVER OF TRIAL BY JURY OR HAS TAKEN ANY
ACTIONS WHICH IN ANY WAY MODIFY OR NULLIFY ITS EFFECT. EACH PARTNER ACKNOWLEDGE
THAT THIS WAIVER IS A MATERIAL INDUCEMENT TO ENTER INTO A BUSINESS RELATIONSHIP,
THAT EACH PARTNER HAS ALREADY RELIED ON THIS WAIVER IN ENTERING INTO THIS
AGREEMENT AND EACH PARTNER WILL CONTINUE TO RELY ON THIS WAIVER IN THEIR RELATED
FUTURE DEALINGS. EACH PARTNER
59
FURTHER ACKNOWLEDGES THAT EACH HAS BEEN REPRESENTED BY INDEPENDENT LEGAL COUNSEL
(OR HAS HAD THE OPPORTUNITY TO BE REPRESENTED) IN THE SIGNING OF THIS AGREEMENT
AND IN THE MAKING OF THIS WAIVER.
Section 16.12 Incorporation of Recitals. The recitals set forth above are
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incorporated and made a part of this Agreement as if fully set forth herein.
[REMAINDER OF PAGE LEFT BLANK INTENTIONALLY;
SIGNATURES APPEAR ON THE FOLLOWING PAGE.]
60
IN WITNESS WHEREOF, the undersigned parties have signed this Limited
Partnership Agreement of the Company as of the day and year first above written.
GENERAL PARTNER:
HERSHA HOSPITALITY LIMITED PARTNERSHIP,
a limited partnership organized under the laws of the
Commonwealth of Virginia
By: Hersha Hospitality Trust,
its general partner
By: /s/ Xxxxxx X. Xxxxxx
Name: Xxxxxx X. Xxxxxx
Title: Chief Financial Officer
LIMITED PARTNER:
CNL HOSPITALITY PARTNERS, L.P.,
a Delaware limited partnership
By: CNL Hospitality GP Corp.,
its general partner
By: /s/ Xxxxxx X. Xxxxxxx
Name: Xxxxxx X. Xxxxxxx
Title: Senior Vice President
HT/CNL METRO HOTELS, L.P.
By: Hersha Hospitality Limited Partnership,
its general partner
By: Hersha Hospitality Trust,
its general partner
By: /s/ Xxxxxx X. Xxxxxx
Name: Xxxxxx X. Xxxxxx
Title: Chief Financial Officer
61
Hersha Hospitality Trust joins in this Agreement for the sole purpose of
acknowledging its obligations with respect to the Exchange Rights of the Limited
Partner pursuant to Article 13.
HERSHA HOSPITALITY TRUST
By: /s/ Xxxxxx X. Xxxxxx
Name: Xxxxxx X. Xxxxxx
Title: Chief Financial Officer
Hersha Hospitality Management, L.P. joins in this Agreement for the sole
purpose of acknowledging its obligations with respect to Sections 3.1, 3.4 and
6.8 hereof.
HERSHA HOSPITALITY MANAGEMENT, L.P.
By: Hersha Hospitality Management, Co.,
its general partner
By: /s/ Xxxxx X. Xxxxxx
Name: Xxxxx X. Xxxxxx
Title: Controller
62
EXHIBIT A
ACQUISITION PROFILE
To be agreed upon by the parties
63
EXHIBIT B
PROPERTIES
None, as of the Effective Date
1
Schedule 3.4
MEMBERS OF INVESTMENT COMMITTEE
-------------------------------
LIMITED PARTNER:
---------------
Xxx Xxxxx
Xxxxx Xxxxxxxxxx
Xxxxxxx Xxxxxx
Xxxx X. Xxxx
Xxxxx X. Xxxxx
Xxxx X. Xxxx
1
Schedule 4.1(b)
PARTNER PERCENTAGE INTEREST PARTNERSHIP UNITS CAPITAL CONTRIBUTION
--------------- -------------------- ----------------- ---------------------
General Partner 33.333% 1 $ 100.00
Limited Partner 66.667% 2 $ 200.00
2
