AMENDED AND RESTATED LIMITED PARTNERSHIP AGREEMENT
OF
RW HOTEL PARTNERS, L.P.,
A Delaware limited partnership
HOLIDAY INN HURSTBOURNE
LOUISVILLE, KENTUCKY
TABLE OF CONTENTS
Section Pages
ARTICLE I CONTINUATION OF PARTNERSHIP; BASIC INFORMATION
Section 1.2 Name
Section 1.3 Termination
Section 1.4 Character of Business
Section 1.5 Names and Addresses of Partners
Section 1.6 Principal Office
Section 1.7 Registered Office; Agent for Service of Process
Section 1.8 Certain Definitions
Section 1.9 Title to Property
ARTICLE II CERTAIN INCORPORATED MATTERS
Section 2.1 Tax and Accounting
ARTICLE III CAPITALIZATION AND LOANS BY PARTNERS
Section 3.1 Contributions By Partners
Section 3.2 Hotel Projects: Rehab Contributions
Section 3.3 Maximum Rehab Contribution Amount
Section 3.4 Partner Loans
ARTICLE IV DISTRIBUTIONS
Section 4.1 Distributions
Section 4.2 Timing of Distributions
Section 4.3 Distributions of Interest on Deferred Sale Price
Section 4.4 Distributions of Capital
ARTICLE V POWERS, RIGHTS AND DUTIES OF PARTNERS
Section 5.1 Authority of Partners
Section 5.2 Sale and Financing Rights
Section 5.3 Certain Obligations of General Partner
Section 5.4 Other Activities
Section 5.5 Liability of General Partner
Section 5.6 Indemnity of General Partner
Section 5.7 Compensation of General Partner
Section 5.8 Hotel Consultant
ARTICLE VI TRANSFER OF PARTNERSHIP INTERESTS
Section 6.1 Restrictions on Transfer
Section 6.2 Effect of Assignment; Documents
Section 6.3 Additional Partners
ARTICLE VII CERTAIN REMEDIES
Section 7.1 Security Agreement
Section 7.2 Termination of Management Rights
Section 7.3 Arbitration
Section 7.4 No Partition
Section 7.5 Litigation Without Termination
Section 7.6 Attorneys' Fees
Section 7.7 Cumulative Remedies
Section 7.8 No Waiver
ARTICLE VIII DISSOLUTION OF THE PARTNERSHIP
Section 8.1 Events Giving Rise to Dissolution
Section 8.2 Purchase and Conversion Options
Section 8.3 Procedure
ARTICLE IX MISCELLANEOUS
Section 9.1 Notices
Section 9.2 Acknowledgement by Partners
Section 9.3 Construction
Section 9.4 Time is of the Essence
Section 9.5 Entire Agreement
Section 9.6 Amendments
Section 9.7 Governing Law; Venue
Section 9.8 Successors and Assigns
Section 9.9 Captions
Section 9.10 Severability
Section 9.11 Counterparts
Section 9.12 No Third Party Beneficiaries
Section 9.13 Certain Terminology
Section 9.14 Incorporation of Exhibits
Section 9.15 Consents and Approvals
Section 9.16 Effectiveness
AMENDED AND RESTATED LIMITED PARTNERSHIP AGREEMENT
OF
RW HOTEL PARTNERS, L.P.
Holiday Inn Hurstbourne
Louisville, Kentucky
THIS AMENDED AND RESTATED LIMITED PARTNERSHIP AGREEMENT
("Agreement") is made and entered into as of the 8th day of
September, 1995, by and among RIDGEWOOD HOTELS, INC., a Georgia
corporation ("Ridgewood"), RW HOTEL INVESTMENT PARTNERS, L.P., a
Delaware limited partnership ("Original Investor") and RW HOTEL
INVESTMENTS, L.L.C., a Delaware limited liability company
("Investor").
R E C I T A L S:
WHEREAS, RW Hotel Partners, L.P., was organized as a limited
partnership (the "Partnership"), under the laws of the State of
Delaware on August 16, 1995, pursuant to the filing of a Certificate
of Limited Partnership with the Delaware Secretary of State in
accordance with the Delaware Revised Uniform Limited Partnership Act
(the "Act");
WHEREAS, Ridgewood and Original Investor entered into a
partnership agreement (the "Partnership Agreement") captioned
"LIMITED PARTNERSHIP AGREEMENT OF RW HOTEL PARTNERS, L.P.", dated as
of August 16, 1995, in order to set out their agreement as to the
conduct of business and the affairs of the Partnership;
WHEREAS, as of the date hereof, Original Investor is assigning
its interest in the Partnership to Investor (and Original Investor
is withdrawing as a partner in the Partnership) and Investor is
being admitted as a substitute limited partner; and
WHEREAS, Ridgewood and Investor desire to amend, restate and
supersede the Partnership Agreement in its entirety.
IN VIEW OF THE FOREGOING FACTS, and in consideration of the
respective undertakings of the parties hereto, effective as of the
date of this Agreement, the Partnership Agreement of the Partnership
is hereby amended and restated in its entirety as follows:
ARTICLE I CONTINUATION OF PARTNERSHIP; BASIC INFORMATION
Section 1.1 Continuation. This Agreement amends, restates and
supersedes the Partnership Agreement in its entirety. As of the
date of this Agreement, sole and only rights of the "Partners" (as
defined below) as partners in this "Partnership" (as defined below)
shall be as set forth in this Agreement. The Partnership shall
continue to operate without interruption as a limited partnership
under the Act. If there is a conflict between the provisions of
this Agreement and the Act, the provisions of the Act shall control
(it being understood that if the Act provides for a particular rule
but allows the partners of a limited partnership to provide to the
contrary in their partnership agreement, and if the parties hereto
have so provided hereunder, then such provisions shall not be deemed
to constitute a conflict for purposes of the foregoing). The
Partners shall execute and deliver and "General Partner" (as defined
below) shall file the Certificate of Limited Partnership of the
Partnerships and any assumed or fictitious or business name
statement or certificate or any similar document required by the Act
or applicable law to be filed in connection with the formation and
operation of the Partnership and General Partner shall perform such
other actions as are required under the Act and applicable law in
order to qualify the Partnership to conduct the business
contemplated by this Agreement (including any required publication).
The Partners further agree to acknowledge, file, record, and publish
as necessary, such amendments to the foregoing as may be required by
this Agreement, the Act or applicable law, and such other documents
as may be appropriate to comply with such requirements for the
formation, preservation, or operation of the Partnership. Upon
termination of the Partnership, General Partner shal promptly
execute and cause to be filed all filings required under the Act and
other applicable laws. General Partner shall promptly deliver to
the Partners copies of all filings made on behalf of the Partnership
in accordance with this Section.
Section 1.2 Name. The Partnership's business shall continue
to be conducted solely under the name of "RW Hotel Partners, L.P."
or any fictitious name upon which the Partners may agree and for
which the appropriate certificate of fictitious name shall be filed
with the appropriate government agency.
Section 1.3 Termination. The term of the Partnership shall
continue until and shall terminate on December 31, 2000, inclusive,
unless sooner terminated as hereinafter provided. As used herein,
"Partnership Year" manes (a) that portion of the current calendar
year (i.e., the calendar year in which the date hereof occurs) which
occurs on or after the date hereof and prior to the termination of
the Partnership in accordance with this Agreement, (b) each full
calendar year on or after the date hereof and prior to the
termination of the Partnership in accordance with Agreement, and (c)
that portion of the calendar year in which the Partnership
terminates in accordance with this Agreement that is on or after the
date hereof and prior to such termination.
Section 1.4 Character of Business. The Partnership may engage
in any lawful purpose expressly approved in writing by the Partners,
except for banking or insurance. The principal purpose of the
Partnership shall be to acquire, improve, maintain, operate, market,
sell and otherwise use the "Hotel Property" (as defined below) for
profit and to engage in all activities related thereto.
Section 1.5 Names and Addresses of Partners. The names and
addresses of the Partners are as follows:
General Partner
Ridgewood Hotels, Inc.
2859 Paces Ferry Road
Suite 700
Atlanta, Georgia 30339
Attention: Mr. N. Russell Walden
Limited Partner
RW Hotel Investment Partners, L.P.
c/o Farallon Capital Management Inc.
One Maritime Plaza, Suite 1325
San Francisco, California 94111
Attention: Mr. Jason M. Fish
Section 1.6 Principal Office. The office and place of
business of the Partnership, at which Partnership records must be
maintained in written form, is 2859 Paces Ferry Road, Suite 700,
Atlanta, Georgia 30339, or at such other place as the Partners shall
from time to time determine. The Partnership may maintain other
offices at such other locations as the Partners shall determine from
time to time.
Section 1.7 Registered Office; Agent for Service of Process.
The registered office and the registered agent for service of
process of the Partnership shall be Corporation Service Company,
1013 Centre Road, Wilmington, Delaware 19805 or such other place as
the Partners may from time to time designate. General Partner shall
cause to be promptly delivered to the Partners a copy of any notice,
complaint or other material received by such agent on behalf of the
Partnership.
Section 1.8 Certain Definitions. As used herein, the
following terms have the following meanings:
"Affiliate" of a person or entity (or words of similar import,
whether or not capitalized) includes (1) any officer, director,
employee, shareholder, partner, member or relative within the third
degree of kindred of the person or entity in question; (2) any
corporation, partnership, limited liability company, trust or other
person or entity controlling, controlled by or under common control
with (a) the person or entity in question or (b) any affiliate of
the person or entity in question (whether directly or indirectly
through one or more intermediaries); and (3) any officer, director,
trustee, partner, member or employee of any person or entity
described in (2) above. For the purpose of this definition,
"control" means the possession, directly or indirectly, of the power
to direct or cause the direction of management and policies, whether
through the ownership of voting securities or by contract or
otherwise. Without limitation on the foregoing, "Manager" (as
hereinafter defined) shall be deemed to be an Affiliate of General
Partner.
"Applicable Rate" means the lesser of (1) 25% per annum, and
(2) the maximum interest that may be charged under any applicable
usury law.
"Bankruptcy/Dissolution Event" with respect to a person or
entity, means the commencement or occurrence of any of the following
with respect to such person or entity: (1) a case under Title 11 of
the U.S. Code, as now constituted or hereafter amended, or under any
other applicable federal or state bankruptcy law or other similar
law; (2) the appointment of (or a proceeding to appoint) a trustee
or receiver of any property interest; (3) an attachment, execution
or other judicial seizure of (or a proceeding to attach, execute or
seize) a substantial property interest; (4) an assignment for the
benefit of creditors; (5) the taking of, failure to take, or
submission to any action indicating (after reasonable investigation)
an inability to meet its financial obligations as they accrue; or
(6) a dissolution or liquidation; provided, however, that the events
described in clauses (1), (2) or (3) shall not be included if the
same are (a) involuntary and not at any time consented to,
(b) contested within 30 days of commencement and thereafter
diligently and continuously contested, and (c) dismissed or set
aside, as the case may be, within 90 days of commencement.
"Base Percentages", "Interim Percentages" and "Residual
Percentages" (collectively, the "Distribution Percentages") mean the
following respective percentages for each of the Partners (subject
to adjustment pursuant to Sections 7.2 and 8.2B):
Base Interim Residual
Partner Percentage Percentage Percentage
Limited
Partner 99% 88% 75%
General
Partner 1% 12% 25%
"Basic Agreement" means that certain agreement captioned
"AMENDED AND RESTATED BASIC AGREEMENT", dated as of August 14, 1995
among Ridgewood, Ridgewood Properties, Inc. ("Operator") and
Investor. The Basic Agreement provides for, among other matters,
the execution and delivery of this Agreement. The following terms
shall have the meanings set forth for the same in the Basic
Agreement: "Closing Date", "Construction Management Agreement",
"Construction Manager", "Management Agreement", "Manager", "Project
Financing", "Purchase Agreement", "Purchase Agreement Certificate",
"Qualified Credit Facility", and "Required Financing Terms".
"Business Agreement" means any lease, rental agreement, loan
agreement, mortgage, easement, covenant, restriction or other
agreement or instrument at any time or times affecting all or a
portion of the Hotel Property or any other "Partnership Property"
(as hereinafter defined).
"Business Plan" means the business plan for the Hotel Property
and Partnership attached as Exhibit "A", as the same may be amended
from time to time in accordance with this Agreement. The Business
Plan shall include the "Operating Budget" and "Rehab Budget" for the
Hotel Property, and shall address the matters set forth in
Exhibit "A". Neither the Business Plan nor any component thereof
shall be deemed to include any matter that has not been approved in
writing by Investor.
"Claim" means any obligation, liability, claim (including any
claim for damage to property or injury to or death of any persons),
lien or encumbrance, loss, damage, cost or expense (including any
judgment, award, settlement, reasonable attorneys' fees and other
costs and expenses incurred in connection with the defense of any
actual or threatened action, proceeding or claim).
"Collateral Agreement" means any agreement, instrument,
document or covenant made or entered into under, pursuant to, or in
connection or concurrently with the Basic Agreement or this
Agreement and any amendment or amendments made at any time or times
heretofore or hereafter to any of the same (including the Management
Agreement or the Construction Management Agreement).
"Cure Period" means (1) fifteen (15) days after written notice
from a Partner to a defaulting Partner specifying the nature of a
default or breach under this Agreement, in connection with a
monetary default that is not a "Noncurable Default" (as hereinafter
defined); (2) thirty (30) days after written notice from a Partner
to a defaulting Partner specifying the nature of a default or breach
under this Agreement, in connection with a non-monetary default that
is not a Noncurable Default (provided, however, that if such
non monetary default cannot reasonably be cured within such 30-day
period, and such defaulting Partner promptly commences the cure of
such default and diligently pursues such cure to completion, then
such 30 day period shall be extended to the extent reasonably
necessary, but in no event after the date that is 45 days after such
written notice); and (3) no period at all for a Noncurable Default.
A "Noncurable Default" means any of the following: (a) a breach of
a representation or warranty, (b) a breach of Section 6.1 or any
other restriction upon transfer or hypothecation, (c) an intentional
breach, (d) a breach of fiduciary duty or a breach constituting
fraud, bad faith or willful misconduct, (e) a breach of Section 5.4
or any other exclusive or non competition covenant, (f) a breach of
an obligation if there have been two prior breaches of such
obligation or a similar obligation within the immediately preceding
two year period (e.g., a failure to timely deliver information if
there have been at least two failures to timely deliver the same or
different information within the immediately preceding 2 year
period), (g) taking action on behalf of the Partnership that is
beyond the scope of authority established by this Agreement, or
(h) a Bankruptcy/Dissolution Event.
"Default Rate" means the lesser of (1) five percentage points
over the Applicable Rate and (2) the maximum interest that may be
charged under any applicable usury law.
"Distributable Cash" for the applicable period means the amount
by which (1) the gross cash revenues and funds received from
Partnership operations during such period (other than funds received
as capital contributions or loans from any Partner), including the
"Net Sale Proceeds" and "Net Financing Proceeds" (each as defined
below) received during such period; exceed (2) the sum of (a) cash
expenditures made by the Partnership or which the Partnership is
obligated to make for or during such period in connection with the
Partnership's operations or in connection with the Partnership
Property, including business taxes and real and personal property
taxes and assessments, insurance premiums, leasing commissions and
fees, tenant improvements and other capital costs, all expenditures
made or required to be made by Manager on behalf of the Partnership
under the Management Agreement, fees payable to Manager under the
Management Agreement, and other operating costs (except to the
extent paid from the "Working Capital Reserve" (as defined below) or
other reserves established pursuant to Section 5.3G or the
Management Agreement), (b) all installments and payments of
principal and interest and other sums and amounts paid or payable
for or during such period on or in connection with any secured or
unsecured indebtedness of the Partnership (including required debt
service and other payments required of the Partnership in connection
with the Project Financing), and (c) the establishment of or
additions to the Working Capital Reserve (as defined below) and such
other reserves as may be established by the Partners pursuant to
Section 5.3G or the Management Agreement (namely, the FF&E reserve
therein described). If the amount described in clause (2) above for
the applicable period exceeds the amount described in clause (1) for
such period, then such excess shall be referred to herein as the
"Negative Cash Flow" for such period. Nothing contained in this
paragraph will limit General Partner's obligations under this
Agreement, including its obligation to comply with the Operating
Budget and Rehab Budget.
"General Partner" means Ridgewood and its successors and
assigns as a general partner in the Partnership, subject to Sections
7.2 and 8.2.
"Governmental Requirements" means all permits, licenses,
approvals, entitlements and other governmental authorizations
required in connection with the ownership, construction, use,
operation or maintenance of the Partnership Property, including any
development agreement, indemnity, surety or performance bond or
other similar assurances to governmental agencies in connection with
the obtaining of entitlements and other governmental approvals for
the "Hotel Project".
"Hotel Property" means that certain Holiday Inn and related
improvements known as the "Holiday Inn Hurstbourne" and located near
Louisville, in Jefferson County, Kentucky, and more particularly
described in the Purchase Agreement. "Hotel Project" means the
refurbishment of the Hotel Property in accordance with the Business
Plan.
"Key Individual" means N. Russell Walden.
"Laws" means all procedural and substantive federal, state and
local laws, moratoria, initiatives, referenda, ordinances, rules,
regulations, standards, orders and other governmental requirements
(including those relating to the environment, health and safety, or
handicapped persons), applicable to Partnership Property, or the
ownership, use, operation, maintenance, sale, lease or other
disposition thereof.
"Limited Partner" means Investor, and its successors and
assigns as a Limited Partner in the Partnership.
"Net Financing Proceeds" and "Net Sale Proceeds" mean,
respectively, that portion of Distributable Cash representing the
net proceeds from (1) any financing or refinancing of the
Partnership Property or any part thereof (other than proceeds from
the Project Financing), and (2) any sale, disposition, taking or
loss (including the proceeds from any eminent domain proceeding or
conveyance in lieu thereof or from casualty insurance [other than
rental income insurance] or title insurance) of the Partnership
Property or any part thereof. In the computation of Net Financing
Proceeds and Net Sale Proceeds there shall be deducted the payment
of all costs and other expenses related thereto and approved by the
Partners and the satisfaction of any debt being refinanced or
discharged and any other debts or liabilities of the Partnership for
which the Partners decide to use the same and the setting aside of
any reserves therefrom reasonably deemed proper by the Partners.
The Partners shall set aside reasonable reserves upon the closing of
any transaction generating Net Financing Proceeds or Net Sale
Proceeds to account for potential post closing liabilities and such
other matters as the Partners may reasonably agree (unless otherwise
agreed in writing by the Partners).
"Operating Account" means the operating account to be
established in the name of the Partnership at a financial
institution reasonably approved by Limited Partner.
"Operating Budget" means the operating budget for the Hotel
Property and the Partnership, which shall be attached to the
Business Plan, as the same may be amended from time to time pursuant
to the written approval of Limited Partner in accordance with this
Agreement.
"Partner" means General Partner or Limited Partner. "Partners"
means General Partner and Limited Partner, collectively.
"Partnership" means the limited partnership governed by this
Agreement.
"Partnership Agreement" or this "Agreement" means this
Agreement, as amended, modified or supplemented from time to time.
"Partnership Property" means all property, of whatever kind or
nature, owned by the Partnership from time to time.
"Plans and Specifications" means the plans and specifications
for the Hotel Property or Hotel Project to be approved by the
Partners pursuant to Section 5.3H, as the same may be amended from
time to time in accordance with this Agreement.
"Qualified Lease" as of a particular date means a lease of a
portion of the Hotel Property to an unrelated third party which
meets all of the following tests as of such date: (1) such lease is
in full force and effect, free from default by either the tenant or
landlord thereunder; and (2) such lease is approved in writing by
Limited Partner.
"Rehab Budget" means a budget for refurbishing the Hotel
Property, which shall be attached to the Business Plan, as the same
may be amended from time to time pursuant to the written approval of
Limited Partner in accordance with this Agreement.
"Requirements" means this Agreement, the Business Plan, the
Operating Budget, the Rehab Budget, the Business Agreements, all
Plans and Specifications, Laws and Governmental Requirements,
collectively.
"Working Capital Reserve" shall have the meaning set forth in
Section 5.3G.
Section 1.9 Title to Property. Title to the assets and
property of the Partnership shall be held in the name of the
Partnership.
ARTICLE II CERTAIN INCORPORATED MATTERS
Section 2.1 Tax and Accounting. Each and all of the
provisions of Exhibit "B" are incorporated herein and shall
constitute part of this Agreement. Exhibit "B" provides for, among
other matters, the maintenance of capital accounts, the allocation
of profits and losses, and the maintenance of books and records.
ARTICLE III CAPITALIZATION AND LOANS BY PARTNERS
Section 3.1 Contributions By Partners.
A. Initial Contributions. On the Closing Date, the Partners
made the following contributions to the Partnership:
(1) General Partner. General Partner contributed the sum
of $165,000.00, and caused Operator to assign its interest in the
Purchase Agreement to the Partnership.
(2) Limited Partner. Limited Partner contributed the sum
of $16,335,000.00.
The contributions by the Partners under this Subsection A shall be
used to fund the following: (a) the purchase price, reasonable
closing costs and other amounts required to be paid by the
Partnership under the Purchase Agreement; (b) reimbursement to
General Partner for its reasonable out of pocket third party costs
paid by General Partner in connection with due diligence under the
Purchase Agreement; and (c) the balance shall be placed by General
Partner in the Operating Account to be applied in accordance with
the Operating Budget and the Rehab Budget.
B. Additional Contributions by General Partner. On each date
(the "Applicable Contribution Date") that a contribution is made or
required to be made by Limited Partner under Section 3.2 of this
Agreement, General Partner shall make a contribution in an amount
(the "Applicable General Partner Contribution Amount") equal to
1/99th of the amount of the contribution to be made by Limited
Partner by delivering the following items:
(1) a demand note (the "General Partner Demand Note") in
the Applicable General Partner Contribution Amount dated as of the
Applicable Contribution Date, duly executed by General Partner and
payable to the order of the Partnership, in the form of
Exhibit "C-1";
(2) a demand note (the "Operator Demand Note") in an
amount equal to the Applicable General Partner Contribution Amount,
from Operator in its capacity as sole shareholder of General
Partner, dated as of the Applicable Contribution Date, duly executed
by Operator, in the form of Exhibit "C-2" and duly endorsed by
General Partner to the Partnership (with an endorsement in the form
of Exhibit "D");
(3) a pledge agreement ("General Partner Pledge
Agreement") dated as of the Applicable Contribution Date and duly
executed by General Partner, in the form of Exhibit "E" pledging the
Operator Demand Note as security for the payment of the General
Partner Demand Notes (except that after the General Partner Pledge
Agreement is delivered for the first contribution by General Partner
under this Section, General Partner shall deliver instead a
supplement to the General Partner Pledge Agreement in form
reasonably required by Limited Partner to reflect the additional
Operator Demand Notes and General Partner Demand Notes delivered);
and
(4) such other documents as Limited Partner may
reasonably request, including evidence of due authorization and
enforceability and an amendment and restatement of the General
Partner Pledge Agreement to evidence and consolidate multiple
supplements then or theretofore delivered.
Section 3.2 Hotel Project: Rehab Contributions. It is
anticipated by the Partners that the funds necessary for the Hotel
Project in accordance with the Business Plan and Rehab Budget shall
be funded from available Partnership funds, with the remaining
amount to be funded by Limited Partner (up to the "Maximum Rehab
Contribution Amount" with respect thereto), upon and subject to the
terms and conditions hereinafter set forth. No additional capital
contributions shall be required by the Partners other than expressly
provided in this Section 3.2 and Section 3.1B.
A. Procedure and Conditions for Each Rehab Contribution.
(1) Procedure. Subject to the terms and conditions set
forth in this Section 3.2, on or before the first day of each
calendar month, Limited Partner shall contribute into the
Partnership Operating Account the amount to be contributed by the
Partners specified in the "Contribution Request" (as defined below)
for such month (the "Rehab Contributions"). General Partner shall
use the Rehab Contributions in strict conformity with the applicable
Contribution Request, the Business Plan and the Rehab Budget
(subject to the deviations permitted under Section 5.1B(3)) and
Requirements. If at any time the Hotel Project cannot be completed
in strict conformity with the most recently approved Business Plan
and Rehab Budget, General Partner shall immediately submit to
Limited Partner for its approval a revised Business Plan and Rehab
Budget in the same form as currently attached as Exhibit "A", except
that General Partner shall identify changes in any line items and
the reasons for the changes. Limited Partner need not make any
further Rehab Contributions unless and until the Partners approve
the revised Business Plan and Rehab Budget. Each modification to
the Business Plan and Rehab Budget is subject to the approval of
Limited Partner pursuant to Section 5.1B.
(2) Conditions to Rehab Contributions. Before Limited
Partner becomes obligated to make any Rehab Contribution, the
following conditions must be satisfied:
(a) Performance by General Partner. The due performance
by General Partner and its affiliates of each and every undertaking
and agreement to be performed by it hereunder in all material
respects and the truth of each representation and warranty made by
it in this Agreement and each Collateral Agreement in all material
respects at the time as of which the same is made and as of the date
each Rehab Contribution is to be made pursuant to this Section 3.2,
as if made on and as of the date such Rehab Contribution is to be
made.
(b) No Defaults. There is no default by the Partnership
under any Project Financing or other Business Agreement.
(c) No Bankruptcy or Dissolution. That at no time shall
any Bankruptcy/Dissolution Event have occurred with respect to
General Partner or any Affiliate.
(d) Key Individual. The Key Individual (1) is not then
dead, insane, incapacitated or the subject of a
Bankruptcy/Dissolution Event; and (2) continues to be actively
involved in the management and affairs of the Project.
(e) Ownership. The Key Individual and Karen Hughes
continue to own at least 43.5% of the ownership interests in
Operator and General Partner, directly or indirectly.
(f) Contribution Request. Limited Partner shall have
received a Contribution Request for such Rehab Contribution meeting
the requirements and within the time period set forth in subsection
B below, and Limited Partner has received any other documentation or
information in connection with such Contribution Request that
Limited Partner may reasonably require.
(g) Reports. Limited Partner shall have received all
financial reports required to have been furnished to date by General
Partner under Section 5.3F.
(h) No Material and Adverse Event. Limited Partner is
not aware of any circumstance which Limited Partner reasonably
determines is likely to have a material and adverse effect upon the
rehabilitation and occupancy of the Hotel Project in conformance
with the Requirements. Any expenditure (or reasonably anticipated
expenditure) which is not within the Rehab Budget approved by
Limited Partner in writing under Section 5.1B (subject to the
overruns which do not require the consent of Limited Partner as
described in Section 5.1B(3)), shall be deemed material and adverse
for purposes of this Agreement.
(i) No Damage. That there shall not have occurred
destruction of or damage or loss to the Partnership Property from
any cause whatsoever, which, according to Limited Partner's best
estimate, would cost more than $50,000 or take longer than 30 days
to restore, unless Limited Partner reasonably determines that the
contingency category in the Rehab Budget, Operating Budget and
insurance proceeds (when combined with the amount of the applicable
deductible) are sufficient to pay for all repairs in a timely
manner.
(j) No Taking. That there shall not have occurred any
taking or proposed or threatened taking of the Hotel Property by
eminent domain (or any part thereof which would render the remaining
portion of the Hotel Property unsuitable for the use and operation
of a hotel in compliance with Laws and Governmental Requirements).
(k) Lien Waivers; Other Evidence of Payment. With
respect to the work covered by each prior Contribution Request,
Limited Partner shall have received invoices, appropriate
unconditional waivers of mechanics' and materialmen's lien rights in
the form required by Laws executed by all contractors,
subcontractors and other persons rendering services, delivering
materials or otherwise receiving payments covered by each prior
Contribution Request (or to the extent lien waivers are
inappropriate due to the nature of the payment involved, cancelled
checks), and such other information and documentation as may be
reasonably required by Limited Partner evidencing that General
Partner have utilized the proceeds of all contributions in
connection with all prior Contribution Requests in accordance with
the Requirements, and that all work covered by prior Contribution
Requests has been done on a lien-free basis (it being understood
that General Partner may bond over liens, provided that Limited
Partner's written consent is first obtained). With respect to the
work covered by the current Contribution Request, Limited Partner
shall have received invoices from all contractors, subcontractors
and other persons rendering services or delivering materials covered
by the current Contribution Request, and such other information and
documentation as may be reasonably required by Limited Partner to
evidence that General Partner will be utilizing the proceeds of the
current Contribution Request in accordance with the Requirements.
With respect to payment of any expenditure in excess of $25,000 (or
any payment regardless of the amount thereof if General Partner is
then in monetary or material non-monetary default or breach under
this Agreement), Limited Partner shall have the right to cause the
payment to the party entitled through an escrow established with
Title Company (and such payment through escrow shall be deemed a
contribution to the Partnership and subsequent expenditure by the
Partnership).
(l) Construction Contracts. Limited Partner shall have
received and approved in writing all engineering, construction,
supply and other material contracts for work (and the parties
thereto) which is the subject of the current Contribution Request
prior to the submission of such Contribution Request (which approval
shall not be unreasonably withheld or delayed and shall not be
required to the extent approval is not required pursuant to
Section 5.1B(6)). Without limitation on the foregoing, each such
contract shall provide for at least 10% retention of all amounts
payable thereunder until verification by the Partnership that all
work and materials required to be provided thereunder have been
provided in accordance with the terms of such contract.
(m) Plans and Specifications. To the extent not
previously approved, any Plans and Specifications pursuant to which
any of the work covered by the current Contribution Request shall
have been approved by Limited Partner, and all applicable
governmental authorities.
(n) Requirements. Limited Partner shall have received
evidence reasonably satisfactory to it that all permits, approvals
and consents then required under the Requirements for the
construction of the work described in such Contribution Request have
been obtained.
(o) Leasing Requirements. To the extent that the work
for which such Contribution Request is made includes work to satisfy
the requirements under any lease, that such lease is a Qualified
Lease, Limited Partner shall received a fully executed copy of such
Qualified Lease, and that the work or proposed work is in full
compliance with such Qualified Lease (and, without limitation, that
the reasonably projected completion date of such work is within the
dates by which such work is required to be completed under such
Qualified Lease).
(p) Retainage. The Contribution Request shall not cover
any retainage unless Limited Partner has received evidence
satisfactory that all work and materials required to be provided
under the contract in question have been provided in accordance with
such contract.
(q) Franchisor Approvals. Without limitation on
subsection A(2)(n) above, Limited Partner shall have received
evidence of all consents and approvals then or theretofore required
by Holiday Inn or any other franchisor with respect to the Hotel
Project.
(r) General Partner Contribution. The corresponding
contribution required to be made by General Partner under Section
3.1B shall have been made (and without limitation on the foregoing,
all documents required to be delivered by General Partner with
respect to such contribution shall have been duly executed and
delivered).
B. Contribution Requests. At least ten (10) days prior to the
first day of each calendar month until the completion of the Hotel
Project, General Partner shall submit a written contribution request
for such month to the Partners describing the contributions to the
Project required of the Partners under this Section 3.2 and meeting
the requirements of this subsection B ("Contribution Request").
Each Contribution Request shall be in a form approved by Limited
Partner, and shall (1) describe in reasonable detail the anticipated
expenditures of the Project for such month set forth in the Rehab
Budget (to be allocated among the specified line item(s) of the
Rehab Budget); (2) indicate the amounts expended by the Partnership
to date for the Project among the specified line item(s) of the
Rehab Budget; (3) describe the portion of such month's expenditures
anticipated to be funded from available Partnership funds;
(4) describe the portion of such month's expenditures which is to be
funded by contributions of Limited Partner; (5) set forth Limited
Partner's required contribution; and (6) be accompanied by the
documentation and information as is required under Section 3.2A(2)
above. General Partner may submit Contribution Requests to the
Partners no more frequently than once each month, unless Limited
Partner has given its prior written consent in each instance. Each
Contribution Request shall constitute General Partner's
representation and warranty to Limited Partner and the Partnership
that (a) all disbursements made to date as well as those being
currently requested were and will be utilized in compliance with the
applicable Contribution Requests and in compliance with the
Requirements; and (b) all representations and warranties of General
Partner or any of its Affiliates in this Agreement, the Basic
Agreement or any Collateral Agreement are true and correct on the
date of such Contribution Request in all material respects (as if
made on and as of such date).
C. No Waiver of Conditions. Any waiver by Limited Partner of
a condition of or to a contribution under this Section 3.2 must be
expressly made by Limited Partner in writing. If Limited Partner
makes a contribution before fulfillment of one or more required
conditions, such contribution shall not be a waiver of such
contribution conditions, and Limited Partner reserves the right to
require their fulfillment before making its share of any further
Rehab Contributions. If all contribution conditions are not
satisfied, Limited Partner, acting in its reasonable judgment and
without waiving any rights or conditions as to any other or further
disbursements, may disburse selectively as to certain items or
categories of costs and not others. Limited Partner's approval of
any matter in connection with this Agreement shall be for the sole
purpose of protecting Limited Partner's investment in the
Partnership, and shall not constitute a waiver of any default by
General Partner or its Affiliates under this Agreement or any
Collateral Agreement (unless such waiver is expressly made by
Limited Partner in writing with specific reference to such default
and agreement) or a representation by Limited Partner of any kind
with regard to the matter being approved. Limited Partner is under
no duty to visit the Hotel Property or to supervise or observe
construction or to examine any books or records. No site visit,
observation or examination by Limited Partner shall impose any
liability on Limited Partner, result in any waiver of any default by
General Partner or its Affiliates under this Agreement or any
Collateral Agreement, or constitute a representation that the Hotel
Project complies or will comply with any Requirement or that any
construction is free from defective materials or workmanship.
Neither General Partner nor any other party is entitled to rely on
any site visit, observation or examination by Limited Partner, and
Limited Partner assumes no personal responsibility for any negligent
or defective design or construction. Limited Partner shall have the
right to contact representatives of the local, state and other
governmental authorities having jurisdiction over the Hotel Project,
or engineers, architects, contractors, suppliers or other third
parties involved in the Hotel Project, in order to verify compliance
by General Partner with this Agreement (including satisfaction of
the conditions set forth in Section 3.2A(2) above).
Section 3.3 Maximum Rehab Contribution Amount.
Notwithstanding anything herein to the contrary, Limited Partner
shall not be required to contribute in excess of an aggregate of
$443,000 pursuant to Section 3.2 above (the "Maximum Rehab
Contribution Amount").
Section Partner Loans. Except as otherwise expressly provided
under this Agreement, any Partner making a loan to the Partnership
shall be entitled to interest thereon at the Applicable Rate,
compounded monthly, and the same, together with interest as
aforesaid, shall be repaid before any distribution shall be made
under Article IV. However, except as otherwise expressly provided
under this Agreement, no such loan to the Partnership shall be made
without the prior written consent of the Partners.
ARTICLE IV DISTRIBUTIONS
Section 4.1 Distributions. Each distribution of Distributable
Cash (excluding interest on any deferred portions of the sale price
of Partnership Property, which shall be distributed under Section
4.3) shall be made as follows:
A. First Level. All such Distributable Cash shall first be
distributed, in preference and priority to any other distribution of
Distributable Cash, to Limited Partner until there shall have been
distributed to Limited Partner under this subsection A an amount
equal to the then "15% IRR Deficiency" (as defined in Exhibit "F");
and there shall be no distributions of Distributable Cash under
subsections B, C or D below at any time when there is a positive 15%
IRR Deficiency.
B. Second Level. The balance, if any, of such Distributable
Cash remaining after the distributions pursuant to subsection A
above shall be distributed to General Partner until the aggregate
amount then or theretofore received by General Partner under this
subsection B equals $165,000.00 (or, if greater, the aggregate cash
contributions actually made by General Partner to the Partnership
under Section 3.1 [it being understood that a demand note does not
constitute a cash contribution, but amounts paid by General Partner
to the Partnership pursuant to a demand note delivered under Section
3.1B of the Partnership Agreement constitute a cash contribution to
the Partnership under Section 3.1]).
C. Third Level. The balance, if any, of such Distributable
Cash remaining after the distributions pursuant to subsections A and
B above shall be distributed to the Partners in accordance with
their respective Interim Percentages on a pari passu basis until
there shall have been distributed to Limited Partner under this
subsection C an amount equal the then "25% IRR Deficiency" (as
defined in Exhibit "F"); and there shall be no distributions of
Distributable Cash under subsection D below at any time when there
is a positive 25% IRR Deficiency.
D. Fourth Level. The balance, if any, of such Distributable
Cash remaining after the distributions pursuant to subsections A, B
and C above shall be distributed to the Partners in accordance with
their respective Residual Percentages on a pari passu basis.
The cash portion of the sale price of the Partnership Property or
any part thereof, together with all installments and payments of
cash (other than interest) of or against any deferred portion of
such purchase price, shall be distributed in accordance with the
levels provided above, with each person or entity entitled to
payment under a level receiving the entire amount of such cash until
the sum payable under such level shall have been discharged in cash.
Section 4.2 Timing of Distributions. Distributions of
Distributable Cash shall be made on a monthly basis on the 20th day
after the end of each calendar month, unless otherwise agreed upon
by the Partners. Notwithstanding the foregoing, distributions of
Net Sale Proceeds and Net Financing Proceeds shall be made promptly
upon receipt, unless otherwise agreed upon by the Partners.
Section 4.3 Distributions of Interest on Deferred Sale Price.
Interest on any deferred portion of the sale price of Partnership
Property shall be distributed to the Partner or Partners entitled
under Section 4.1 to receive the principal portion of such sale
price with respect to which such interest shall have been paid.
Section 4.4 Distributions of Capital. Except as expressly
provided in this Agreement or as otherwise agreed by the Partners,
no Partner shall be entitled to withdraw capital or to receive
distributions of or against capital without the prior written
consent of, and upon the terms and conditions agreed upon by, the
Partners. Each Partner shall look solely to the assets of the
Partnership for return of such Partner's capital contributions.
ARTICLE V POWERS, RIGHTS AND DUTIES OF PARTNERS
Section 5.1 Authority of Partners.
A. Authority of General Partner. Except as otherwise provided
in this Agreement, General Partner shall have full power and
authority to manage the operations and affairs of the Partnership
and to act for and to bind the Partnership to the extent provided by
applicable law, and shall have the duty and authority, on behalf of
the Partnership, to do all things appropriate to the accomplishment
of the purposes of the Partnership, including:
(1) Filing appropriate organizational documents for the
Partnership with the appropriate governmental authorities.
(2) Operating the Hotel Property and entering into
agreements and undertakings pertaining to the operation of the Hotel
Property.
(3) Employing consultants, attorneys, accountants and
agents.
(4) Executing contracts, agreements, deeds and other
writings.
(5) In general, managing the business and affairs of the
Partnership and taking such actions as may be necessary or
appropriate thereto.
B. Major Decisions. General Partner shall fully consult with
Limited Partner at all times, and each of the following matters
("Major Decisions") must be previously approved in writing by
Limited Partner:
(1) The adoption of, and any material supplement to,
material revision of, or material deviation from, the Business Plan.
(2) The adoption of, and any supplement to, revision of,
or deviation from, the Operating Budget, the Rehab Budget or any
other Partnership budget (subject to subsection (3) below). General
Partner shall submit to Limited Partner, on or before November 1 of
each year, the proposed Operating Budget and Rehab Budget for the
following calendar year, which proposed budgets shall be in the same
form as the form of the initial Operating Budget and Rehab Budget
attached to the Business Plan, and which proposed Operating Budget
and Rehab Budget shall be subject to the prior written approval of
Limited Partner.
(3) Any deviation from or expenditure inconsistent with
the Operating Budget, the Rehab Budget or any other Partnership
budget. Notwithstanding the foregoing, Limited Partner's consent to
an expenditure relating to the Hotel Property payable to a third
party exceeding the amount specified for such expenditure in the
Operating Budget or the Rehab Budget shall not be required in any of
the following circumstances: (a) General Partner, in its reasonable
judgment, deems to constitute an emergency requiring immediate
action for the protection of the Hotel Property or persons; (b) such
expenditure is related to the Hotel Project, and when combined with
the amount of all expenditures made or reasonably expected to be
made in connection with the Hotel Project, would not cause the total
amount of expenditures for the Hotel Project to exceed one hundred
five percent (105%) of the total amount of expenditures for the
Hotel Project set forth in the Rehab Budget; (c) such expenditure is
contemplated by the Operating Budget for the Hotel Property (and not
the Rehab Budget), and when combined with the amount of all
expenditures made or reasonably expected to be made in connection
with the Hotel Property for such calendar year (other than the
expenditures for the Hotel Project or described in clause (d)
below), would not cause the total amount of expenditures for the
Hotel Property for such calendar year (other than the expenditures
for the Hotel Project or described in clause (d) below), to exceed
one hundred five percent (105%) of the total amount of expenditures
for such calendar year set forth in the Operating Budget (other than
the expenditures for the Hotel Project or described in clause (d)
below); and (d) expenditures for real property taxes and
assessments, utilities and insurance for the Hotel Property, and
required debt service under the Project Financing. General Partner
shall promptly notify Limited Partner of each expenditure made
pursuant to this subsection (3) and shall promptly supply Limited
Partner with such information with respect thereto as Limited
Partner may reasonably request.
(4) Any material activity (including the entry into any
contract or incurring any obligation) or expenditure which is
inconsistent with the Business Plan (it being understood that the
Business Plan is a general outline only, and does not contemplate
every activity or expenditure which is customarily undertaken or
incurred in connection with projects similar to the Hotel Project);
and prior to the preparation by General Partner of the Business Plan
(or any required update thereof) and approval of the same by Limited
Partner, the entry into any contract or incurring any obligation or
taking any other action that could give rise to any cost or
liability in excess of $25,000.
(5) Any transaction or matter that is not in the ordinary
course of the Partnership's business or that is not directly related
to the acquisition, refurbishment, operation or sale of the Hotel
Property.
(6) The entry into any construction, development or other
agreement which provides for a term greater than three months or
contemplates an aggregate amount to be spent by the Partnership
under such agreement in excess of $100,000 (and a series of related
agreements for amounts less than $100,000 shall be construed as a
single agreement for purposes of this subsection); or any
termination or material modification to any of the foregoing. Any
execution, termination or modification of the Management Agreement
or the Construction Management Agreement shall be subject to the
prior approval of Limited Partner.
(7) Any capital transaction (including the sale,
financing or refinancing of the Partnership Property or any portion
thereof, or the acquisition of any other property or business) and
the terms thereof.
(8) Any compensation or reimbursement to, or other
transaction with any Affiliate of General Partner or any other
person or entity with which General Partner or any of its Affiliates
has a significant business relationship.
(9) The establishment and maintenance of reserves and
contributions thereto (the foregoing not being intended to require
the consent of Limited Partner in connection with the maintenance of
the FF&E Reserve by Manager pursuant to the terms and conditions of
the Management Agreement).
(10) Any litigation, arbitration or settlement involving
the Partnership or its assets. Notwithstanding the foregoing,
Limited Partner's consent shall not be required in connection with
defense of Claims against the Partnership which are covered by
insurance of the Partnership, or in connection with necessary legal
action or proceedings for the collection of rent or other income
from the Partnership Property, or for the ousting or dispossessing
of defaulting tenants or other persons therefrom (except that any
such action taken with respect to a tenant occupying 10,000 square
feet or more of the Hotel Property shall constitute a Major
Decision).
(11) All income tax elections, tax returns and tax
audits.
(12) Establishment of and any material amendment or
supplement to the Plans and Specifications for any construction work
for the Hotel Property.
(13) The entry into or the material modification of any
Governmental Requirements, including the creation of any material
concessions by or restrictions on the Partnership, the Hotel Project
or the Hotel Property or other Partnership Property in connection
with obtaining zoning, variances, map approval, entitlements,
permits or other governmental approvals.
(14) The entry into or any material amendment or
modification to any lease, and the terms thereof.
(15) Establishment and any modification to the lease form
for the Partnership.
(16) The employment and retention of a manager, leasing
agent and other personnel (the foregoing not being intended to
require the consent of Limited Partner in connection with the
employment by Manager of its employees and personnel).
(17) Any other decision or action which requires the
approval of the Partners as provided elsewhere in this Agreement.
General Partner shall use its reasonable business judgment in
proposing Major Decisions, and Limited Partner shall use its good
faith judgment in approving or withholding approval of the same.
Notwithstanding the immediately preceding sentence, Limited Partner
may withhold or impose conditions upon its approval of any
acquisition of any additional property or business by the
Partnership in its sole and absolute discretion (including General
Partner or Operator's agreement to a modification of the economic
terms of the Partnership Agreement, Management Agreement or
Construction Management Agreement to the extent they are related to
such additional property or business which is the subject of such
acquisition). Any approval by Limited Partner pursuant to this
subsection B must be in writing; provided, however, that General
Partner may give Limited Partner written notice of any proposed
Major Decision, and if Limited Partner does not object to the same
or request further information with respect thereto within 15 days
after receipt of such notice, Limited Partner shall be deemed to
have disapproved the proposed Major Decision. Notwithstanding the
foregoing, if General Partner gives Limited Partner written notice
(in the form prescribed below) requesting approval of any lease
pursuant to clause (14) above and if Limited Partner does not object
to the same or request further information with respect thereto
within 3 business days (such period extended to 10 business days in
connection with a lease of 10,000 square feet or more) after receipt
of such notice, Limited Partner shall be deemed to have approved
such lease. Any notice requesting Limited Partner's approval of a
lease shall prominently state in capitalized boldface language that
Limited Partner's consent will be deemed to have been given if no
response is made within the applicable period. If further
information is requested by Limited Partner within the applicable
time period set forth above, General Partner shall use reasonable
and diligent efforts to supply the requested information and may
thereupon give a new notice of the proposed Major Decision as
provided above. If Limited Partner fails to approve a proposed
Major Decision, the Partners shall attempt in good faith to resolve
the deadlock as quickly as practicable.
C. Management and Construction Management Agreements. The
parties hereby confirm that the Management Agreement and the
Construction Management Agreement have been entered into with
Operator with respect to the Hotel Property in the forms prescribed
by the Basic Agreement and otherwise in accordance with the Business
Plan.
D. Prohibited Acts. No Partner shall have any authority to:
(1) Unilaterally amend this Agreement.
(2) Extend the term of the Partnership.
(3) Do any act in contravention of this Agreement or
which would make it impossible to carry on the business of the
Partnership.
(4) Possess any Partnership Property or assign the rights
of the Partnership in specific Partnership Property for other than a
Partnership purpose.
(5) Admit a person or entity as a Partner except as
provided in this Agreement.
(6) Permit the Partnership to merge or consolidate with
any other entity.
(7) Engage in any transaction on behalf of the
Partnership with itself or an Affiliate, even if approved by the
Partners, except upon terms which are fair as respects the
Partnership and competitive with the terms available to the
Partnership from non Affiliates.
(8) Make, execute or deliver on behalf of the Partnership
any assignment for the benefit of creditors (other than a collateral
assignment, as security, to a lender under Section 5.2) or any
guarantee, indemnity bond or surety bond, other than reasonable and
customary bonds and assurances to governmental agencies in
connection with the obtaining of entitlements and other governmental
approvals or to lenders in connection with development or
construction financing; or obligate the Partnership or any Partner
as a surety, guarantor or accommodation party to any obligation.
(9) Lend funds belonging to the Partnership or any
Partner to any Partner or third party or extend to any person, firm
or corporation, credit on behalf of the Partnership.
(10) Subject to Section 5.2, borrow on behalf of the
Partnership, or pledge, mortgage or encumber, or grant of a security
interest in, any Partnership Property.
(11) Confess any judgment on behalf of the Partnership.
(12) File any petition, or consent to the appointment of
a trustee or receiver or any judgment or order, under the federal
bankruptcy laws.
(13) Any action that will result in the Partnership not
being treated as a partnership for income tax purposes.
E. Required Signatures. Limited Partner's signature (or a
written notice granting General Partner sole authority to sign)
shall be required for all contracts (including documents related to
the acquisition, sale, financing or transfer of any portion of the
Partnership Property) entered into by or on behalf of the
Partnership. However, only General Partner's signature will be
required for (1) contracts and agreements (but not documents related
to the acquisition, sale, financing or transfer of any portion of
the Partnership Property, which are also to be executed by Limited
Partner or expressly approved in writing by a notice with the form
of document attached) that are provided for in an approved
Partnership Budget or otherwise permitted without the consent of
Limited Partner pursuant to subsections B(2) and B(3) above, and (2)
leases which are approved or deemed approved by Limited Partner
pursuant to Section 5.1B.
F. Affiliate Transactions. Notwithstanding anything to the
contrary herein, any decision by the Partnership to terminate or
exercise any right (including any right to approve or request, or
any right to receive documents) or remedy under any contract between
the Partnership and General Partner or an Affiliate of General
Partner (or any instrument from or by General Partner or an
Affiliate of General Partner in favor of or for the benefit of the
Partnership) shall be made exclusively by Limited Partner on behalf
of the Partnership (and thus, for example, Limited Partner shall
make the decision, on behalf of the Partnership with respect to the
Partnership's termination of, or the exercise of any right or remedy
under, the Management Agreement or the Construction Management
Agreement and Limited Partner shall make the decision, on behalf of
the Partnership, with respect to the exercise of any right or remedy
under each General Partner Demand Note, General Partner Pledge
Agreement and the collateral thereunder). If a contract with an
Affiliate is terminated, any substitute contract shall be with a
third party reasonably satisfactory to the Partners. In addition,
notwithstanding anything to the contrary herein (including any loss
of voting rights), any act or other transaction between the
Partnership on the one hand, and any Partner, its Affiliates or any
other person or entity with which such Partner or any of its
Affiliates has a significant business or personal relationship, on
the other hand, shall require the prior written approval of the
other Partner.
G. Determinations by the Partners. Any approval, consent,
judgement or other determination to be made by the Partners under
and in connection with this Agreement shall be made jointly by the
Partners and shall therefore require their mutual agreement.
Section 5.2 Sale and Financing Rights. From and after the
date which is 30 months after the date of this Agreement, Limited
Partner shall have the right (without the consent of General
Partner) to propose that the Partnership sell or finance the Hotel
Property (and all matters incidental thereto), in which event
General Partner shall use diligent efforts to cause such proposal to
be promptly effectuated, subject to compliance with the provisions
of this Article (other than Sections 5.1B(7) and 5.1D(10) hereof).
A. Financing Terms. Unless otherwise approved by the
Partners, any financing obtained on behalf of the Partnership under
this Section 5.2 shall comply with the Required Financing Terms.
B. Sale Terms. Except as otherwise approved by the Partners,
the purchase price for the Hotel Property or the portion thereof to
be sold or disposed of shall be payable (1) entirely in cash; or
(2) by taking title subject to or assuming existing indebtedness; or
(3) both. In addition, the terms of the sale of the Hotel Property
(other than the Purchase Price) shall be subject to the reasonable
approval of the Partners, and shall not impose upon the Partnership
or any Partner any material liability or obligation unless the
aggregate liability under such contract does not exceed 5% of the
purchase price and no obligations survive for more than twelve
months after the closing of the sale without the approval of the
Partners.
C. Sale to Affiliate; Affiliate Financing. No sale of any
Partnership Property shall be made to an Affiliate of a Partner, and
no financing shall be provided by an Affiliate of a Partner, without
the prior written approval of the other Partner.
D. Right of First Opportunity. Prior to consummating a
proposed sale, Limited Partner (the "Selling Partner") shall provide
the "Non-Selling Partner" (i.e., General Partner) with a right to
purchase the Selling Partner's interest in the Partnership on and
subject to the terms and conditions hereinafter stated:
(1) The Selling Partner shall give written notice (the
"Proposed Sale Notice") to the Non-Selling Partner setting forth the
"Basic Sale Terms" (as hereinafter defined) of such proposed sale.
As used herein, "Basic Sale Terms" means the proposed purchase
price, the amount of cash payable to the Partnership by the
purchaser at the closing, the amount and terms of the purchase money
note, if any, evidencing a portion of the purchase price and
security for such promissory note, any other material economic terms
of the proposed sale, and the estimated closing date of the
transaction. The Basic Sale Terms shall comply with the
requirements of subsection B above.
(2) The Non Selling Partner shall have fifteen (15) days
(the "Election Period") after the giving of the Proposed Sale Notice
to elect to purchase the Selling Partner's interest in the
Partnership (such election to be made, if at all, by giving written
notice thereof to the Selling Partner within the Election Period).
The purchase price of the Selling Partner's Partnership interest and
the terms of such purchase will be such as will produce for the
Selling Partner the same consideration and security at the same time
or times as the Selling Partner would have received if the proposed
sale by the Partnership had been consummated (and no sales
commissions had been paid by the Partnership [i.e., without any
deduction for a sales commission]) and the Partnership had been
dissolved and wound up following such sale and the proceeds of such
sale and other assets of the Partnership had been distributed to the
Partners in accordance with the provisions of this Agreement.
(3) If the Non Selling Partner fails to make the election
to purchase, then the Selling Partner may close a sale at any time
or times during the six month period (the "Closing Period") that
commences on the first day after the Election Period, for a purchase
price and on terms which are at least as favorable to the
Partnership as the Basic Sale Terms contained in the Proposed Sale
Notice; but if a sale for such purchase price and on such terms is
not consummated within such period, then the rights of the
Non-Selling Partner to notice and purchase as aforesaid will
continue as to any sale occurring subsequent to such period. A sale
shall be deemed "at least as favorable" as that set forth in the
Proposed Sale Notice if the net purchase price and net cash down
payment (after the payment by the Partnership of all of its expenses
[other than attorneys' fees] associated with the sale, including any
real estate commissions) shall be at least equal to that set forth
in the Proposed Sale Notice (after deduction for the expenses
therein set forth) and the deferred portion, if any, of such
purchase price, shall be payable at an interest rate and in
installments which are at least as great as, and be payable over a
period which is not longer than, the deferred portion, if any, of
the purchase price specified in the Proposed Sale Notice.
(4) If the Non Selling Partner makes the election to
purchase, then such election shall be deemed to create a contract
between the Non Selling Partner and the Selling Partner pursuant to
which the Non Selling Partner agrees to acquire the interest of the
Selling Partner in the Partnership on the terms specified in clause
(2) above, except that the closing date for such sale shall be the
date which is 60 days after the making of such election. If the
Non Selling Partner makes the election to purchase but the closing
fails to occur due to the Non Selling Partner's default, then
without limitation on the Selling Partner's other rights and
remedies (including specific performance and damages), the
Non Selling Partner's rights under this subsection 5.2 will be
permanently lost.
Section 5.3 Certain Obligations of General Partner
A. Generally. General Partner shall at all times act in a
fiduciary capacity in exercising its power and authority and shall
not engage in any dealings having the appearance of impropriety.
General Partner shall fully and faithfully discharge its obligations
and responsibilities, and shall devote sufficient time and attention
to Partnership affairs to ensure the proper management and
supervision of the Partnership's business and the discharge of its
duties under this Agreement. General Partner shall diligently and
continuously pursue the planning, acquisition, refurbishment,
operation, marketing and sale of the Partnership Property in
accordance with reasonable business judgment, and shall make its
personnel and the personnel of its Affiliates available to the
Partnership to the extent necessary in order that its obligations
may be adequately discharged.
B. Project Administration. Without limitation on the
foregoing or other provisions of this Article V, General Partner
shall coordinate and manage the administration necessary for the
planning, acquisition, refurbishment, operation, marketing and sale
of the Hotel Property and the Hotel Project within the time schedule
set forth and in full compliance with all Requirements, and shall,
at all times, exercise good faith and shall use diligent and
professional efforts to promote and protect the best interests of
the Hotel Project, the Hotel Property and the Partnership (without
consideration being made to the separate interests of any particular
Partner, including the effect of any action or omission upon the
distributions provided for in Article IV). Without limiting the
generality of the foregoing, General Partner shall have the
following duties and obligations:
(1) Cooperation with Limited Partner in connection with
their preparation of and the Partners' approval of the Business
Plan, and all elements thereof (including the Operating Budget and
Rehab Budget) and amendments thereto, in a timely manner, and the
acquisition, refurbishment, operation, marketing, and sale of the
Hotel Property in compliance therewith.
(2) [INTENTIONALLY OMITTED.]
(3) Making regular inspections of the Partnership
Property and using diligent and professional efforts to have all
problems, if any, observed by General Partner corrected in such
manner as is in the best interests of the Partnership.
(4) Seeking, negotiating and closing the Project
Financing and monitoring the same on a regular basis to ensure
compliance by the Partnership with respect to the requirements
thereof.
(5) Monitoring the Partnership's compliance with
Requirements and taking such steps as may be reasonably necessary to
ensure the Partnership's compliance with the Requirements.
(6) Procurement of insurance for the Partnership and the
Partnership Property through an agent acceptable to Limited Partner,
including casualty, public liability, workers' compensation and all
other insurance required by law, and such other insurance as may be
required by Limited Partner, with the amounts and coverages approved
by Limited Partner; and requiring that all contractors,
subcontractors, consultants, marketing and leasing agents,
third-party vendors and service agents maintain such insurance as
General Partner reasonably deems necessary to the extent such
insurance is customarily maintained by such parties in the City in
which the Hotel Property is located in connection with projects
similar to the Hotel Project in order to protect the interests of
the Partnership for all work, materials or services to be provided
by them hereunder.
(7) Developing and implementing a system for the
preparation, review and processing of "Change Orders" (as such term
is hereinafter defined) and recommending necessary or desirable
changes to the Partnership and consultants, reviewing requests for
Change Orders, submitting recommendations to the Partnership and
consultants, and negotiation of Change Orders. As used herein,
"Change Orders" shall mean changes permitted by this Agreement or
authorized by the Partners in the construction of the Hotel Project,
including changes in materials, labor or additional construction
authorized by the Partnership or omissions of certain aspects of the
construction previously authorized by the Partnership. Each Change
Order shall comply with all Requirements and shall require the
consent of Limited Partner if it involves an amount greater than
$5,000.
(8) Payment or contestation of all real and personal
property taxes and assessments for the Partnership Property to the
extent not done under the Management Agreement.
(9) Notification of the Partners of any material adverse
Claim or dispute or any actual or threatened material litigation (or
condemnation or eminent domain proceeding or action) against the
Partnership, the Partnership Property (or any portion thereof), any
Partner, and all contractors, subcontractors, material suppliers,
consultants and marketing agents of which General Partner become
aware; provided, however, that with respect to any litigation that
only respects General Partner and is not related to the Partnership
Property, General Partner shall be obligated to notify the
Partnership of such matter only if said matter involves an amount in
excess of $100,000 or could have an adverse material impact on
General Partner.
(10) The use of diligent and professional efforts to
prevent any mechanic's or materialmen's liens to be filed by any
contractors, subcontractors, materialmen or suppliers against the
Partnership Property or any portion thereof, or against any monies
due or to become due on account of, arising out of or relating to
the Hotel Project. If any such lien is filed, General Partner shall
(i) promptly notify the Partnership upon discovering the existence
of such lien and (ii) promptly take such action as General Partner
reasonably determines to be necessary to protect the Partnership
Property after consultation with Limited Partner.
(11) Compliance with all Requirements in connection with
the performance of General Partner's duties and obligations under
this Agreement.
(12) Conducting meetings of the Partnership, as may be
reasonably required by Limited Partner, for the purpose of reviewing
the progress of the planning, refurbishment, operation, marketing or
sale of the Partnership Property.
(13) Conducting periodic evaluations in order to
determine compliance by third parties under their engagement
agreements with the Partnership, and the diligent enforcement of the
rights and remedies of the Partnership in connection therewith.
C. Monitoring Management and Construction Management
Agreements. General Partner shall monitor and supervise Manager's
activities under or in connection with the Construction Management
Agreement and the Management Agreement.
D. [OMITTED]
E. Books and Records. General Partner shall cause to be kept
proper and complete records and books of account in which shall be
entered fully and accurately all transactions and other matters
relating to the Partnership's business as are usually entered into
such records and books of account kept for business of a like
character. The Partnership's records and books shall be kept on an
accrual basis, except as the Partners may otherwise determine. At
all times, such books and records shall be available at the
Partnership's principal place of business for inspection,
examination, photocopying or audit by any Partner, or the duly
authorized representative thereof, during reasonable business hours
and upon reasonable advance notice.
F. Reports. General Partner shall provide Limited Partner
with reports as follows:
(1) An annual report of all income and all expenses
within 90 days of the end of the calendar year, audited by an
independent accounting firm reasonably satisfactory to Limited
Partner.
(2) Copies of the Partnership's annual federal and state
income tax returns together with a copy of that certain IRS form
commonly referred to as a "Schedule K-1," plus a copy of its
equivalent in California, Delaware and any other state in which a
Partner is required to pay income taxes by reason of the
Partnership, within 60 days following the end of each calendar year
(or at such other times as may be agreed to in writing by the
Partners).
(3) Monthly operating statements and reports of financial
condition of the Partnership for each calendar month certified by
General Partner to be true, accurate and complete in all material
respects, and submitted to Limited Partner within 20 days of the end
of each such calendar month (the "Monthly Report"). The Monthly
Report shall be in a form approved by Limited Partner, and shall
include a report regarding the status of the Hotel Project and a
Contribution Request with respect thereto containing General
Partner's estimate of the amount needed to be contributed pursuant
to Section 3.2 to meet costs of the Hotel Project for the succeeding
calendar month and to replenish the Working Capital Reserve and
other reserves established by the Partners.
(4) A monthly variance report, within 20 days after the
end of each calendar month, comparing actual costs and expenses and
revenues with budgeted costs and expenses and revenues on a
line-item basis and on a category basis along with an explanation of
all material or significant variances and all changes in any time
schedules relating thereto.
(5) Monthly reports, within 20 days after the end of each
month, which shall describe in reasonable detail the daily occupancy
and room rates (and average daily rate) for such month.
(6) At least 60 days prior to each fiscal year of the
Partnership, annual updates of the Business Plan, the Operating
Budget and the Rehab Budget for the Hotel Property.
(7) Such other reports as may be reasonably requested by
Limited Partner.
G. Working Capital Reserve and Other Reserves. In addition to
the FF&E Reserve established by Manager pursuant to each Management
Agreement, the Partners, in their reasonable discretion, shall
establish and maintain such other reasonable reserves for future
costs, expenses and payments or for substantial costs (including
capital repairs, improvements and replacements, and anticipated
tenant improvements), to the extent the payment of such costs is not
contemplated by the FF&E Reserves. Without limitation on the
foregoing, General Partner shall maintain a working capital reserve
in the Partnership Operating Account in order to meet anticipated
and unanticipated cash needs of the Partnership (the "Working
Capital Reserve"). The Working Capital Reserve shall be established
in the Master Budget but (1) shall not be less than $200,000 and
(2) shall not exceed $1,000,000, without the prior written consent
of Limited Partner.
H. Approval of Plans and Specifications. As to any item
of the construction work as to which plans, or plans and
specifications, are typically prepared in accordance with customary
practice in the real estate construction industry in the state in
which the Hotel Property is located (collectively, the "Plans and
Specifications"), General Partner shall use diligent and
professional efforts to ensure that such Plans and Specifications
are prepared in accordance with all Requirements and are otherwise
sufficient to permit the affected portion of the construction work
to be completed in a good and workmanlike manner, free from defects.
All such Plans and Specifications shall be subject to the reasonable
approval of the Partners.
I. Fidelity Bond. General Partner shall obtain at its
expense and deliver to the Partners a fidelity bond covering General
Partner and its employees and agents with a liability amount of at
least $5,000,000, which such bond shall be maintained by General
Partner throughout the term of this Agreement. Limited Partner, in
the exercise of its reasonable discretion, may require General
Partner to increase the amount of such bond at General Partner's
expense if Limited Partner determines that circumstances (including
the anticipated average balance of the Operating Account) reasonably
warrant such increase in view of the risks involved.
Section 5.4 Other Activities.
A. Generally. Except as provided in subsections B and C
below: (1) each Partner recognizes that the other Partner has an
interest in investing in, developing, constructing, operating,
transferring, leasing and otherwise using real property and
interests therein for profit, and engaging in any and all activities
related or incidental thereto and that each will make other
investments consistent with such interests; (2) neither the
Partnership nor any Partner shall have any right by virtue of this
Agreement or the Partnership relationship created hereby in or to
any other ventures or activities in which any Partner is involved or
to the income or proceeds derived therefrom; (3) the pursuit of
other ventures and activities by any Partner, even if competitive
with the business of the Partnership, is hereby consented to by the
other Partner and shall not be deemed wrongful or improper; (4) no
Partner and no Affiliate of a Partner shall be obligated to present
any particular investment opportunity to the Partnership, even if
such opportunity is of a character which, if presented to the
Partnership, could be taken by the Partnership; and (5) each Partner
and each Affiliate of a Partner shall have the right to take for its
own account, or to recommend to others, any such particular
investment opportunity.
B. Anti Competition Covenant. Notwithstanding the foregoing:
(1) without the prior written consent of the Partners, none of
General Partner, Operator or any of their respective owners or
principals shall attempt, either directly or through an Affiliate,
to (a) acquire a hotel within a ten mile radius of the Hotel
Property, except for the benefit of the Partnership, (b) acquire any
Holiday Inn in the United States of America (except (i) for the
benefit of the Partnership or (ii) in strict compliance with
subsection C below), or (c) divert any person or entity that is a
potential patron or tenant of the Hotel Property; and (2) Key
Individual shall not pursue any business opportunity (other than (i)
business opportunities pursued on behalf of the Partnership in
accordance with this Agreement, (ii) business opportunities pursued
in strict compliance with subsection C below, or (iii) management
opportunities pursued on behalf of Operator that are expressly
permitted by subsection C below), without the prior written consent
of Limited Partner (which consent shall not be unreasonably
withheld).
C. Right of First Offer. General Partner and Operator each
represents and warrants to Limited Partner and the Partnership, and
each of them, that no person or entity has a right of first refusal
or other contractual right to purchase or finance any interest in,
or provide equity capital for, the acquisition, refurbishment,
operation or sale of Holiday Inns or any other hotel in a
transaction involving any one or more of Operator, General Partner
and their respective owners and principals. In consideration of
Limited Partner's effort and expense in analyzing and negotiating
the transactions contemplated by the Basic Agreement and this
Agreement, during the period ("Exclusivity Period") commencing on
the date hereof and continuing until the earlier of (1) December 31,
1996, or (2) the date that Limited Partner delivers to General
Partner and Operator a written termination notice specifically
waiving the requirements of this subsection C, neither Operator,
General Partner nor any of their respective owners or principals
will make any offers to, or accept any offers from, and will have no
discussions with, third parties (i.e., any person or entity other
than the Partnership) as to any transaction involving the
acquisition, refurbishment, operation or sale of Holiday Inns or any
other hotel, except strictly in compliance with either subsection
(1) or (2) below.
(1) Right of First Offer. During the Exclusivity Period,
General Partner and Operator and any of their respective owners or
principals shall first present all opportunities involving the
acquisition, refurbishment, operation or sale of Holiday Inns or any
other hotel to Limited Partner, which notice shall include a
reasonably detailed description of such opportunity, and to the
extent available, all relevant documentation as to such opportunity
(individually, an "Opportunity Notice"). If any particular hotel
acquisition described in an Opportunity Notice is rejected in
writing by Limited Partner, then Operator, General Partner or an
affiliate thereof shall have the right to acquire the same provided
that (a) all material terms of such acquisition were disclosed to
Limited Partner in the Opportunity Notice, (b) such acquisition is
on terms that are no more favorable to the purchaser than those
disclosed to Limited Partner in the Opportunity Notice, (c) such
acquisition is consummated on a date no later than six months after
the date that the opportunity described in the Opportunity Notice is
so rejected by Limited Partner, (d) it is not reasonably likely that
such acquisition or the operation of the opportunity described in
the Opportunity Notice will interfere with or otherwise conflict
with the obligations of General Partner and Operator under this
Agreement or any Collateral Agreement, and (e) General Partner or
Operator provides Limited Partner sufficient information to
establish that the foregoing conditions are satisfied. Limited
Partner shall respond to an Opportunity Notice within 30 days after
Limited Partner's receipt thereof, together with such other
information as Limited Partner may reasonably request.
(2) Permitted Activities by Operator. Operator may
continue to perform as manager under bona fide management agreements
entered into prior to the date hereof and may enter into any
subsequent management agreements provided that it is reasonably
likely that such performance (when added to all other then existing
obligations of Operator and its affiliates) will not interfere with
or otherwise conflict with obligations of General Partner or
Operator under this Agreement or any Collateral Agreement (and
Operator provides Limited Partner with such information as may be
reasonably necessary to establish the foregoing, including quarterly
reports setting forth, among other matters, a list of all then
existing management contracts under which Operator or an affiliate
is the manager).
D. Joinder by Operator. Operator is joining this Agreement
solely for the purpose of agreeing to the provisions of this Section
5.4.
Section 5.5 Liability of General Partner. Subject to the
provisions of any other agreement to which the General Partner is a
party, and except for the obligations to a Partner or Partners or
the Partnership imposed under such other agreement, General Partner
shall not be liable, responsible or accountable in damages or
otherwise to the Partnership or any other Partner for any action
taken or failure to act by General Partner in its business judgment
on behalf of the Partnership within the scope of the authority
conferred on it by this Agreement unless such action or omission
constituted a breach or default under this Agreement, the Basic
Agreement or any Collateral Agreement, a breach of fiduciary duty, a
tort or willful misconduct.
Section 5.6 Indemnity of General Partner. The Partnership
(but not the Partners personally) shall indemnify, defend and hold
General Partner harmless from and against any loss, expense, damage
or injury suffered or sustained by it by reason of any acts,
omissions or alleged acts or omissions by General Partner on behalf
of the Partnership within the scope of authority conferred on it by
this Agreement, including any judgment, award, settlement,
reasonable attorneys' fees and other costs and expenses incurred in
connection with the defense of any actual or threatened action,
proceeding or claim; provided that the acts or omissions or alleged
acts or omissions upon which such actual or threatened action,
proceeding or claim is based were in good faith in accordance with
its business judgment and did not constitute a breach or default
under this Agreement, the Basic Agreement, or any Collateral
Agreement, a breach of fiduciary duty, a tort or willful misconduct
(and General Partner shall indemnify, defend and hold harmless the
Partnership and Limited Partner, and each of them, from and against
any loss, expense, damage or injury suffered or sustained by it by
reason of the matters described in this proviso).
Section 5.7. Compensation of General Partner. General Partner
shall not receive any fee or other compensation or reimbursement in
connection with the performance by it of its obligations under this
Agreement.
Section 5.8 Hotel Consultant. In the event Limited Partner
determines in its sole discretion that it is in the interest of the
Partnership to have a consultant overseeing the operations and
activities of the Partnership, Limited Partner shall have the right
to retain a consultant ("Hotel Consultant"), at the Partnership's
expense, as Limited Partner's consultant in connection with the
Partnership, in order to advise Limited Partner in connection with,
among other matters, all approvals requested of Limited Partner
under this Agreement (including Major Decisions and the
administration of all Contribution Requests pursuant to Section
3.2). If Hotel Consultant is retained, it shall be furnished with
copies of all information, reports, documents, notices and other
materials required to be provided to Limited Partner pursuant to
this Agreement, at the same time furnished to Limited Partner. In
addition, Limited Partner shall have the right by written notice to
General Partner to cause General Partner to furnish certain
information, reports, documents and other materials solely to Hotel
Consultant as agent for Limited Partner.
ARTICLE VI TRANSFER OF PARTNERSHIP INTERESTS
Section 6.1 Restrictions on Transfer.
A. No sale, exchange, delivery, assignment, transfer,
disposal, encumbrance, pledge or hypothecation, whether voluntary,
involuntary, by operation of law, or resulting from death,
disability or otherwise (a "Transfer") shall be made by a Partner of
the whole or any part of its interest in the Partnership (including
its interest in the capital or profits of the Partnership) without
the prior written consent of the other Partner.
B. No Transfer shall be made of any direct or indirect
interest in General Partner without the prior written consent of
Limited Partner; provided, however, that Limited Partner's consent
shall not be unreasonably withheld in connection with any Transfer
(other than a hypothecation), of any direct or indirect interest in
General Partner so long as, immediately after such Transfer, the
conditions set forth in Section 3.2A(2)(d) and Section 3.2A(2)(e)
remain satisfied.
C. No transfer or assignment of an interest in the Partnership
may be made to any person or entity (1) if, in the opinion of legal
counsel for the Partnership, such transfer or assignment may result
in the Partnership becoming an investment company under the
Investment Company Act of 1940, as amended (the "1940 Act") or (2)
unless the transferee provides a legal opinion, if requested by
General Partner, from a law firm and in form reasonably satisfactory
to General Partner, to the effect that the Partnership will not
constitute an investment company under the 1940 Act by reason of
such transfer or assignment.
D. No Transfer in violation of the provisions hereof shall be
valid or effective for any purpose, and no consent to one or more of
the same shall be deemed consent to any other of the same.
Section 6.2 Effect of Assignment; Documents. In the event of
any Transfer permitted hereunder, subject to Article VIII, the
Partnership shall not be terminated but instead shall continue as
before, with, however, the addition or substitution of such new
Partner. No such Transfer shall relieve the assignor from any of
its obligations under this Agreement. Notwithstanding the
foregoing, as a condition to any sale or assignment by a Partner,
the transferee or assignee must execute and deliver to the other
Partner an assumption (in form reasonably satisfactory to the other
Partner) of all the obligations of the assignee under this Agreement
arising from and after the date of such assignment. If any Transfer
is made in violation of this Article VI, the transferee shall have
no right to become a Partner and shall have no right to participate
in the management and affairs of the Partnership. The transferee in
such case shall only be entitled to receive the share of the
distributions payable to it under Article IV to which the
transferring Partner would have been entitled.
Section 6.3 Additional Partners. Without limitation on the
foregoing, no person or entity shall become an additional partner
without the prior written consent of the Partners. In the event
such consent is granted, the existing Partners and such new Partner
shall execute such documents as may be reasonably required by the
existing Partners to effect such admission, including, without
limitation an amendment to this Agreement.
ARTICLE VII CERTAIN REMEDIES
Section 7.1 Security Agreement.
A. Assignment. Each Partner shall and does hereby assign and
transfer to the Partnership and the other Partner, all its right,
title and interest in and claims against the Partnership (or any
successor thereto) now or at any time or times hereafter held,
including its interest in the capital and the profits and losses of
the Partnership.
B. Obligations Secured. The property and interests assigned
and transferred as aforesaid by each Partner shall constitute and
shall be held as collateral security for each and all of the
obligations of such Partner (and its Affiliates) under this
Agreement, the Basic Agreement or any Collateral Agreement, and such
Partner hereby grants to the Partnership and the other Partner a
security interest in the property and interests assigned and
transferred as aforesaid for such purposes (and hereby waives any
guarantor or suretyship defense that may otherwise apply with
respect thereto).
C. Remedies. In the event a Partner shall breach or default
in, or fail to comply with, any of its obligations secured hereby
and such breach shall continue past the expiration of the Cure
Period, then the Partnership and the other Partner, or any of them,
in addition to its or their other rights and remedies (including
those provided by law and those provided by any other agreement or
security agreement), may (1) pursue the remedies against the
property and interests transferred and assigned hereunder available
under the applicable provisions of law, including the applicable
provisions of any state commercial code, and (2) cause to be paid to
it or them any sum payable on account of or with respect to the
property and interests assigned as security as aforesaid (including
any distribution with respect to a Partnership interest) and apply
such sum to the amount to which the Partnership and such other
Partner, or any of them, are or become entitled with respect to the
obligation or obligations secured hereunder. Notwithstanding the
foregoing, if General Partner is entitled to and timely delivers an
"Arbitration Notice" (as defined below) pursuant to Section 7.2
below, then the Cure Period shall be tolled as and to the extent
provided in Section 7.2B(b) below.
(1) Any foreclosure of a Partner's interest pursuant to
this Section may, at the election of such foreclosing party, be made
subject to this security agreement as to any future obligations and
liabilities of such foreclosed Partner under this Agreement (with
the result that the Partnership and the other Partner may make
multiple foreclosures of each Partner's interest in the
Partnership).
(2) Each Partner shall execute and cause to be filed such
financing statements as the Partnership or the other Partner$shall
from time to time reasonably request to perfect or maintain the
perfection of the security interests herein granted to the
Partnership or such other Partner hereunder.
(3) Each Partner shall have priority to the Partnership
with respect to the rights assigned hereunder.
Section 7.2 Termination of Management Rights.
A. Limited Partner may deliver a termination notice to General
Partner ("Termination Notice") upon the occurrence of any of the
following events:
(1) Any act of fraud, dishonesty, or material breach of
fiduciary duty.
(2) Any material breach of this Agreement or any
Collateral Agreement by General Partner (or an Affiliate), other
than a breach described in clause (3) below, which is not cured
within the Cure Period.
(3) The failure by General Partner to provide effective
management of the Partnership and the Hotel Project pursuant to
Article V hereof in a manner consistent with prevailing commercial
practices for the planning, acquisition, refurbishment, operation,
marketing and sale of similar projects (and such failure has or is
reasonably expected to have a material and adverse effect upon the
Partnership or the Hotel Property), and the failure to correct such
deficiencies within the Cure Period.
(4) The occurrence of a Bankruptcy/Dissolution Event with
respect to General Partner or any of its constituent entities or
principals or the failure of any of the conditions set forth in
Section 3.2A(2)(d) or 3.2A(2)(e).
B. The Termination Notice shall specify with particularity the
basis for the same and shall become effective the later of (1) (10)
ten days after the date of the Termination Notice, or (2) if
applicable, after the expiration of the applicable Cure Period set
forth above. Notwithstanding the foregoing, General Partner may
dispute the existence of grounds for the termination described in
subsection A(1), A(2) (but not subsection A(3)) by written notice
("Arbitration Notice") to Limited Partner within 10 days after its
receipt of the Termination Notice. In the event an Arbitration
Notice is given within the period set forth above, then (a) the
dispute shall be resolved by arbitration as provided in Section 7.3,
(b) the applicable Cure Period set forth above shall be tolled
pending the resolution of the dispute by arbitration, and (c) if the
arbitrators uphold the termination, then the Termination Notice
shall become effective after the expiration of the applicable Cure
Period set forth above (subject to clause (b) above). A Termination
Notice shall become effective immediately solely in connection with
a termination described in subsection A(3) above.
C. If a Termination Notice becomes effective, then:
(1)(a) the Limited Partner shall have the right to
designate and admit a managing General Partner of the Partnership
with all the power and authority previously possessed by General
Partner, (b) General Partner shall remain a Partner in the
Partnership, but with no power, authority or right to vote, approve
or act for or bind the Partnership with respect to any matter in
connection with the Partnership or its operation, (c) with respect
to all Distributable Cash for the period commencing upon the date
that the Termination Notice become effective, General Partner's
Residual Percentage and Interim Percentage shall not exceed its Base
Percentage, and accordingly, all distributions under Section 4.1C
and 4.1D shall be made to the Partners in accordance with their
respective Base Percentages on a pari passu basis, (d) Limited
Partner, at its option, may terminate the term of the Partnership by
written notice to General Partner, and (e) Limited Partner, at its
option, may terminate the term of the Management Agreement and the
Construction Management Agreement.
(2) [INTENTIONALLY OMITTED]
(3) Any sums distributable or payable to General Partner
or its Affiliates shall be offset against any damages due the
Partnership or Limited Partner from General Partner or Affiliate (as
such damages are determined by a final unappealable judgment from a
court of proper jurisdiction).
(4) General Partner shall execute and acknowledge any
required amendments to this Agreement reflecting the foregoing, in
such form and content as Limited Partner may reasonably prescribe.
In addition, General Partner hereby constitutes Limited Partner as
its true and lawful attorney in fact, on its behalf and in its
stead, with full power of substitution, to execute and acknowledge
any such amendment. This power of attorney shall be deemed coupled
with an interest and shall not be vevoked by the dissolution,
insolvency or otherwise.
(5) General Partner's obligations under this Agreement
shall in no event be limited (except that General Partner shall no
longer be obligated to perform those obligations under Article V
that require authority of General Partner that has been terminated).
D. Limited Partner's right to deliver a Termination Notice
pursuant to this Section shall be in addition to, and not in lieu
of, any other remedy available to the Partners or the Partnership at
law or in equity (including the collection of monetary damages, the
enforcement of this Agreement in equity or the appointment of a
receiver for all or part of the Partnership Property) in the event
of a breach by General Partner (or any Affiliate) of its obligations
under this Agreement or any Collateral Agreement.
Section 7.3 Arbitration
ARBITRATION OF DISPUTES
A. SUBJECT TO THE PROVISIONS OF THIS SECTION 7.3, ANY DISPUTE
AMONG THE PARTNERS UNDER SECTION 7.2 SHALL BE RESOLVED BY
ARBITRATION IN SAN FRANCISCO, CALIFORNIA, IN ACCORDANCE WITH THE
FOLLOWING (WHERE, FOR PURPOSES OF THIS SECTION):
(1) THE PARTNER DESIRING ARBITRATION SHALL GIVE WRITTEN
NOTICE OF THAT FACT TO THE OTHER PARTNER, ACCOMPANIED BY A
DESIGNATION OF AN ARBITRATOR; IF THE OTHER PARTNER FAILS TO
DESIGNATE ANOTHER ARBITRATOR BY WRITTEN NOTICE TO THE FIRST PARTNER
WITHIN THE TIME PERIOD DESCRIBED BELOW, THE ARBITRATOR SHALL BE THE
PERSON DESIGNATED BY THE FIRST PARTNER; IF THE OTHER PARTNER
DESIGNATES ANOTHER ARBITRATOR WITHIN SUCH PERIOD, THEN THE TWO
ARBITRATORS SO DESIGNATED SHALL SELECT A THIRD ARBITRATOR AS SOON AS
PRACTICABLE THEREAFTER, AND THE ARBITRATION SHALL BE CONDUCTED BY
ALL THREE ARBITRATORS. FOR PURPOSES OF THE PRECEDING SENTENCE, THE
REQUIRED TIME PERIOD SHALL BE 15 DAYS AFTER SUCH DESIGNATION.
(2) THE PARTNERS AND THE ARBITRATORS SHALL USE THEIR
MUTUAL DILIGENT EFFORTS TO CAUSE THE ARBITRATION TO BE CONDUCTED AND
A DECISION RENDERED WITHIN 60 DAYS THEREAFTER.
(3) THE ARBITRATORS SHALL CONDUCT THE ARBITRATION
GENERALLY IN ACCORDANCE WITH THE RULES OF THE AMERICAN ARBITRATION
ASSOCIATION, WITH SUCH MODIFICATIONS THEREOF AS THEY MAY DEEM
APPROPRIATE; WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, THE
ARBITRATORS MAY AFFORD THE PARTIES THE OPPORTUNITY TO CONDUCT
DISCOVERY IN ACCORDANCE WITH SUCH RULES AND LIMITATIONS AS THE
ARBITRATORS MAY PRESCRIBE.
(4) THE ARBITRATORS MAY RETAIN COUNSEL (WHICH ARE NOT
AFFILIATES OF ANY PARTNER) TO ADVISE THEM AS TO THE INTERPRETATION
OF THE PARTNERSHIP AGREEMENT OR OTHER LEGAL MATTERS, THE COST OF
WHICH SHALL BE A COST OF THE ARBITRATION.
(5) THE ARBITRATORS SHALL BE ENTITLED TO REASONABLE
COMPENSATION AND REIMBURSEMENT OF EXPENSES AS MUTUALLY AGREED WITH
THE PARTNERS, OR IF THEY ARE UNABLE TO AGREE THEN AS REASONABLY
DETERMINED BY THE ARBITRATORS.
(6) THE COMPENSATION OF THE ARBITRATORS AND OTHER COSTS
OF THE ARBITRATION SHALL BE PAID BY THE PARTNERS IN SUCH EQUITABLE
PROPORTIONS AS MAY BE DETERMINED BY THE ARBITRATORS.
(7) THE AWARD AND ALL OTHER DECISIONS OF THE ARBITRATORS
SHALL BE FINAL AND BINDING UPON THE PARTNERS AND THE PARTNERSHIP,
AND A JUDGMENT MAY BE RENDERED THEREON IN ANY COURT OF RECORD,
EXCEPT THAT ANY PARTNER MAY CONTEST AND OBTAIN JUDICIAL REVIEW OF
THE REASONABLENESS OF THE ARBITRATORS' DETERMINATION OF COMPENSATION
PURSUANT TO CLAUSE (5) ABOVE.
B. THE ONLY ISSUES TO BE DETERMINED BY THE ARBITRATORS SHALL
BE THE EFFECTIVENESS OR INEFFECTIVENESS OF A TERMINATION NOTICE.
THE ARBITRATORS SHALL HAVE NO AUTHORITY TO AWARD ANY LEGAL OR
EQUITABLE RELIEF (INCLUDING MONETARY DAMAGES). THE PARTIES RESERVE
THEIR RIGHT TO A TRIAL BY A COURT OF LAW OR EQUITY OF ANY CLAIM FOR
LEGAL OR EQUITABLE RELIEF AS A CONSEQUENCE OF ANY MATTER COVERED BY
SECTION 7.2, ALTHOUGH IN ANY SUCH TRIAL THE DECISION OF THE
ARBITRATORS SHALL BE BINDING WITH RESPECT TO THE ISSUES DETERMINED
BY THEM.
C. DISPUTES UNDER PROVISIONS OF THIS AGREEMENT OTHER THAN
SECTION 7.2 SHALL NOT BE RESOLVED BY ARBITRATION UNLESS THE PARTIES
OTHERWISE AGREE, EXCEPT THAT THE ARBITRATORS SHALL HAVE THE
AUTHORITY TO DETERMINE ISSUES UNDER OTHER PROVISIONS OF THIS
AGREEMENT TO THE EXTENT NECESSARY TO RESOLVE DISPUTES UNDER
SECTION 7.2.
D. EACH ARBITRATOR SHALL BE AN INDEPENDENT PERSON OR ENTITY
THAT IS THEN ACTIVE IN (AND HAS AT LEAST FIVE YEARS' EXPERIENCE IN)
OWNING, OPERATING OR CONSULTING IN THE HOTEL/MOTEL INDUSTRY IN THE
UNITED STATES AND AT LEAST ONE OF WHICH SHALL BE AN INDEPENDENT
COMMERCIAL PROPERTY MANAGEMENT FIRM THAT IS THEN ACTIVE IN (AND HAS
AT LEAST FIVE YEARS' EXPERIENCE IN) THE MANAGEMENT AND OPERATION OF
COMMERCIAL PROPERTIES SIMILAR TO THE PARTNERSHIP PROPERTY. NO
ARBITRATOR SHALL BE IN THE EMPLOY OF THE PARTNERSHIP, ANY PARTNER OR
ANY AFFILIATE OF THE FOREGOING DURING THE PENDENCY OF THE
ARBITRATION.
ASSENT TO ARBITRATION PROVISION
NOTICE: BY INITIALING IN THE SPACE BELOW YOU ARE AGREEING TO
HAVE ANY DISPUTE ARISING OUT OF THE MATTERS INCLUDED IN THE
"ARBITRATION OF DISPUTES" PROVISION DECIDED BY NEUTRAL ARBITRATION
AND YOU ARE GIVING UP ANY RIGHTS YOU MIGHT POSSESS TO HAVE THE
DISPUTE LITIGATED IN A COURT OR JURY TRIAL. BY INITIALING IN THE
SPACE BELOW YOU ARE GIVING UP YOUR JUDICIAL RIGHTS TO DISCOVERY AND
APPEAL, UNLESS THOSE RIGHTS ARE SPECIFICALLY INCLUDED IN THE
"ARBITRATION OF DISPUTES" PROVISION. YOUR AGREEMENT TO THIS
ARBITRATION PROVISION IS VOLUNTARY.
WE HAVE READ AND UNDERSTAND THE FOREGOING AND AGREE %PAGES
TO SUBMIT DISPUTES ARISING OUT OF THE MATTERS INCLUDED IN THE
"ARBITRATION OF DISPUTES" PROVISION TO NEUTRAL ARBITRATION.
___ General Partner ___ Limited Partner
Section 7.4 No Partition. Each Partner hereby irrevocably
waives any and all rights that it may have to maintain any action
for partition of any of the Partnership Property.
Section 7.5 Litigation Without Termination. Any Partner shall
be entitled to maintain, on its own behalf or on behalf of the
Partnership, any action or proceeding against the other Partner or
the Partnership (including any action for damages, specific
performance or declaratory relief) for or by reason of breach of
such party of this Agreement or any other agreement entered into in
connection with the same, notwithstanding the fact that any or all
of the parties to such proceeding may then be Partners in the
Partnership, and without resulting in a termination of the
Partnership.
Section 7.6 Attorneys' Fees. If the Partnership or any party
obtains a judgment against any other party by reason of breach of
this Agreement (whether in an action or through arbitration), then
the Partnership or such party shall be entitled to recover its court
(or arbitration) costs, and reasonable attorneys' fees (including
the reasonable value of in-house attorney services) and
disbursements incurred in connection therewith and in any appeal or
enforcement proceeding thereafter, in addition to all other
recoverable costs.
Section 7.7 Cumulative Remedies. No remedy conferred upon the
Partnership or any Partner in this Agreement is intended to be
exclusive of any other remedy herein or by law provided or
permitted, but each shall be cumulative and shall be in addition to
every other remedy given hereunder or now or hereafter existing at
law, in equity or by statute (subject, however, to the limitations
expressly herein set forth). General Partner shall be primarily,
jointly and severally liable for each of the obligations and
liabilities of General Partner and its Affiliates under this
Agreement, the Basic Agreement and each Collateral Agreement.
General Partner hereby waives any surety or guarantor defense that
may otherwise apply.
Section 7.8 No Waiver. No waiver by a Partner or the
Partnership of any breach of this Agreement shall be deemed to be a
waiver of any other breach of any kind or nature, and no acceptance
of payment or performance by a Partner or the Partnership after any
such breach shall be deemed to be a waiver of any breach of this
Agreement, whether or not such Partner or the Partnership knows of
such breach at the time it accepts such payment or performance. No
failure or delay on the part of a Partner or the Partnership to
exercise any right it may have shall prevent the exercise thereof by
such Partner or the Partnership at any time such other may continue
to be so in default, and no such failure or delay shall operate as a
waiver of any default.
ARTICLE VIII DISSOLUTION OF THE PARTNERSHIP
Section 8.1 Events Giving Rise to Dissolution. No act, thing,
occurrence, event or circumstance shall cause or result in the
dissolution of the Partnership; except that the happening of any one
of the following events (individually, a "Dissolution Event") shall
work an immediate dissolution of the Partnership (unless in
connection with such event a Partner is entitled to and exercises a
"Partnership Purchase Option" or a "Partnership Conversion Option"
[as defined below] pursuant to Section 8.2 below):
A. The death, incapacity, insanity, retirement, resignation or
expulsion of General Partner, or the occurrence of a
Bankruptcy/Dissolution Event with respect to General Partner. As
used herein, with respect to General Partner only, a Dissolution
Event shall also include (1) the failure of conditions set forth in
Section 3.2A(2)(d) or Section 3.2A(2)(e) to remain satisfied; or (2)
the occurrence of a Bankruptcy/Dissolution Event with respect to
Operator.
B. The sale of all of the real estate assets of the
Partnership (provided, however, that if a portion of the purchase
price of such sale is evidenced by a promissory note, the
Partnership shall not be dissolved by reason of such sale so long as
the Partnership is the holder of such promissory note).
C. The unanimous agreement in writing by the Partners to
dissolve the Partnership.
D. The termination of the term of the Partnership pursuant to
Section 1.3 or 7.2C(1) of this Agreement.
E. At the written election of Limited Partner (which election
may not be made prior to the date that is three years after the date
of this Agreement).
Without limitation on the other provisions hereof, neither the
assignment of all or any part of a Partner's interest in the
Partnership permitted hereunder nor the admission of a new member
shall work the dissolution of the Partnership. Except as otherwise
provided in this Agreement, each Partner agrees that, without the
consent of the Partners, a Partner may not retire or withdraw from
or cause a voluntary dissolution of the Partnership (except that the
foregoing shall not be deemed to require any Partner to exercise a
Partnership Purchase Option or a Partnership Conversion Option).
Section 8.2 Purchase and Conversion Options. In the event of
a Dissolution Event described in Section 8.1A (the General Partner
being herein called the "Dissolution Partner"), then the "Electing
Partner" (i.e., Limited Partner) shall have the option, exercisable
by written notice to the Dissolution Partner or its personal
representative, successor or assign, at any time within 90 days
after it learns of the Dissolution Event, either (A) to have the
Partnership interest of the Dissolution Partner converted to that of
a silent Partner with no right to vote, approve or act with respect
to any Partnership matter (such option being herein called the
"Partnership Conversion Option"), or (B) to purchase the Partnership
interest of the Dissolution Partner on the terms hereinafter set
forth (such option being herein called the "Partnership Purchase
Option"). Nothing herein shall be deemed to require the Electing
Partner to exercise either such option.
A. Partnership Conversion Option. In the event of the
exercise of the Partnership Conversion Option, the Electing Partner
shall have the right to appoint a new General Partner and the
Dissolution Partner (or its personal representative, successor or
assign) shall thereafter have no right to vote, approve or act with
respect to any Partnership matter, but the Partnership shall
otherwise be identical in every respect (including the terms and
conditions of this Agreement) to the Partnership prior to such
conversion (and, subject to the adjustment in Distribution
Percentages provided in subsection B below, if applicable), each
Partner shall thus hold the same interest in the profits and losses
and Distributable Cash as it held immediately prior to such
conversion as a Partner hereunder, except that the Dissolution
Partner's interest in the Partnership after such conversion shall be
such that the Dissolution Partner shall have no right to vote,
approve or act with respect to any Partnership matter and Electing
Partner shall have the right to designate and admit a managing
General Partner of the Partnership. The Dissolution Partner agrees,
on behalf of itself and its representatives, successors and assigns,
to promptly execute such documents and agreements (including an
amendment to this Agreement) and do such other acts as may be
reasonably deemed to be necessary or desirable by the Electing
Partner or its counsel to carry out the Partnership Conversion
Option. In addition, the Dissolution Partner, on behalf of itself,
its representatives, successors and assigns, hereby constitutes and
appoints the Electing Partner its true and lawful attorney-in-fact
with full power of substitution to execute documents and agreements
(including amendments to this Agreement) and to take such further
acts as may be reasonably determined by such attorney-in-fact or its
counsel to be necessary or desirable to carry out the Partnership
Conversion Option. This power of attorney shall be deemed to be a
power coupled with an interest which cannot be revoked by the
occurrence of a Bankruptcy/Dissolution Event or otherwise.
B. Adjustment to Distribution Percentages. Effective upon the
exercise by Limited Partner of its Partnership Conversion Option in
connection therewith: (1) the Partners' Distribution Percentages
shall be adjusted in the same manner as provided under Section
7.2C1(c); and (2) [INTENTIONALLY OMITTED].
C. Partnership Purchase Option. In the event of the exercise
of the Partnership Purchase Option, the consideration for the
Dissolution Partner's Partnership interest shall be the amount (if
any) that will produce for the Dissolution Partner the same amount
in cash as it would have received if the Partnership Property owned
by the Partnership at the date on which the Dissolution Event occurs
had been sold at 95% of its then fair market value (such 5% discount
being intended to reflect the reduction in value attributable to the
sale of a partial interest) and the Partnership had been dissolved
and wound up following such sale and the distributions of the Net
Sale Proceeds of such sale had been made in accordance with
Section 4.1.
(1) The fair market value of such Partnership Property
shall be as agreed upon by the Electing Partner and the Dissolution
Partner, or if they fail to agree upon such value within 45 days
after the giving of the Partnership Purchase Option notice, then as
determined by appraisal, in accordance with procedure set forth in
Exhibit "G".
(2) Any sum payable for the Dissolution Partner's
Partnership interest as hereinabove determined must be paid in cash
within 60 days after the determination of the amount of the same as
aforesaid. Concurrently with the payment of such sum (or if no
amount shall be payable for such interest, then upon demand of the
assignee), the assignor of such interest shall deliver or cause to
be delivered to such assignee such assignments of Partnership
interest and other instruments and documents confirming the
assignment and transfer as such assignee shall reasonably request.
The acquisition of such Partnership interest as aforesaid shall be
deemed effective as of the date on which the Dissolution Event
occurred ("Dissolution Event Date"), and, accordingly, the assignee
shall be entitled to all profits and losses and distributions of
Distributable Cash for any period after the Dissolution Event Date.
(3) The Electing Partner may assign its rights under this
Section 8.2 to purchase the Dissolution Partner's Partnership
interest.
Section 8.3 Procedure.
A. In the event of the dissolution or termination of the
Partnership for any reason, General Partner (or if a Dissolution
Event under Section 8.1A or 8.1B has occurred, then Limited Partner)
shall commence to wind up the affairs of the Partnership and to
liquidate its investments. The Partner obligated to wind up %PAGEE
the affairs of the Partnership as aforesaid is herein called the
"Winding Up Partner". The Partners shall continue to share profits,
losses, gain or loss on sale or disposition, and Distributable Cash
during the period of liquidation in the same manner and proportion
as though the Partnership had not dissolved or terminated. The
Winding Up Partner shall have full right and unlimited discretion to
determine in good faith the time, manner and terms of any sale or
sales of Partnership Property pursuant to such liquidation having
due regard to the activity and condition of the relevant market and
general financial and economic conditions.
B. Following the payment of all debts and liabilities of the
Partnership and all expenses of liquidation, and subject to the
right of the Winding Up Partner to set up such cash reserves as and
for so long as it may deem reasonably necessary in good faith for
any contingent or unforeseen liabilities or obligations of the
Partnership, the proceeds of the liquidation and any other funds of
the Partnership shall be distributed in accordance with Section 4.1
hereof (after deducting from the distributive share of a Partner any
sum such Partner owes the Partnership).
C. Each Partner shall look solely to the assets of the
Partnership for all distributions with respect to the Partnership
and its capital contribution thereto and share of profits or losses
thereof and shall have no recourse therefor (in the event of any
deficit in a Partner's capital account or otherwise) against the
other Partner; provided that nothing herein contained shall relieve
any Partner of such Partner's obligation to make the capital
contributions herein provided or to pay any liability or
indebtedness owing the Partnership by such Partner, and the
Partnership and the other Partner shall be entitled at all times to
enforce such obligations of such Partner. No holder of a
Partnership interest shall have any right to demand or receive
property other than cash upon dissolution and termination of the
Partnership.
D. Upon the completion of the liquidation of the Partnership
and the distribution of all Partnership funds, the Partnership shall
terminate and the Winding Up Partner shall have the authority to
execute and record a certificate of termination of the Partnership,
as well as any and all other documents required to effectuate the
dissolution and termination of the Partnership.
ARTICLE IX MISCELLANEOUS
Section 9.1 Notices. Any notice which a party is required or
may desire to give the other party shall be in writing and may be
delivered (1) personally, (2) by United States registered or
certified mail, postage prepaid, (3) by Federal Express or other
reputable courier service regularly providing evidence of delivery
(with charges paid by the party sending the notice), or (4) by
telecopy, provided that such telecopy shall be immediately followed
by delivery of such notice pursuant to clause (1), (2) or (3) above.
Any such notice shall be addressed as follows (subject to the right
of a party to designate a different address for itself by notice
similarly given):
TO GENERAL PARTNER:
Ridgewood Hotels, Inc.
2859 Paces Ferry Road
Suite 700
Atlanta, Georgia 30339
Attention: Mr. N. Russell Walden
Telephone No.: (404) 434 3670
Facsimile No.: (404) 433 8935
With Copy to:
Troutman Sanders
Suite 5200
600 Peachtree Street, N.E.
Atlanta, Georgia 30308 2216
Attention: John W. Moore, Esq.
Telephone No.: (404) 885 3188
Facsimile No.: (404) 885 3900
TO LIMITED PARTNER:
c/o Farallon Capital Management, Inc.
One Maritime Plaza, Suite 1325
San Francisco, California 94111
Attention: Mr. Jason M. Fish
Office (gen.): (415) 421 2132
Telecopy: (415) 421 2133
With Copy To:
Pircher, Nichols & Meeks
1999 Avenue of the Stars
Suite 2600
Los Angeles, California 90067
Attention: Real Estate Notices (SAC/RCS)
Office (gen.): (310) 201 8900
Telecopy: (310) 201 8922
Any notice so given by United States mail or courier service shall
be deemed to have been given on the date delivered (whether accepted
or refused) as evidenced by the return receipt or other proof of
delivery. Any notice not so given by U.S. mail or courier service
shall be deemed to be given upon receipt of the same by the party to
whom the same is to be given.
Section 9.2 Acknowledgement by Partners. Each Partner
acknowledges the following: (A) it is familiar with the business
proposed to be conducted by the Partnership; (B) it has been advised
that the Partnership Interest may not be sold, transferred, or
otherwise disposed of except as provided herein; (C) it understands
that the securities being purchased hereby have not been registered
under the Securities Act of 1933, (the "Act"), or any State
securities laws, in reliance on an exemption for private offerings
and, therefore, the securities cannot be resold unless they are
registered under the Act and applicable State securities laws or
unless an exemption from such registration is available; (D) it is a
"sophisticated investor" with substantial prior experience in
high-risk business investments and is aware of and familiar with the
risks associated with a private limited partnership and would
qualify as an "accredited investor" as such is defined in Rule 501
of Regulation D, as enacted pursuant to Sections 3(b) and 4(2) of
the Act; and (E) it is purchasing the Partnership Interest for his,
her, or its own account, for investment only and with no present
intention of distributing, reselling, pledging, or otherwise
disposing of its interest; (F) that it is familiar with the type of
investment which the Partnership interest in the Partnership
constitutes and have reviewed the purchase of the interest with its
tax and independent legal counsel and investment representatives to
the extent he deems necessary.
Section 9.3 Construction. Every covenant, term, and provision
of this Agreement shall be construed simply according to its fair
meaning and not strictly for or against any Partner (notwithstanding
any rule of law requiring an Agreement to be strictly construed
against the drafting party).
Section 9.4 Time is of the Essence. Time is of the essence
with respect to this Agreement.
Section 9.5 Entire Agreement. This Agreement constitutes the
entire agreement between the parties. This Agreement supersedes any
prior agreement or understandings between the parties.
Section 9.6 Amendments. This Agreement may be amended by
written agreement of amendment executed by the Partners, but not
otherwise, unless expressly provided herein.
Section 9.7 Governing Law; Venue. This Agreement and the
rights of the parties hereunder shall be governed by and interpreted
in accordance with the laws of the State of Delaware (without regard
to conflicts of laws). Each party hereby consents to the
jurisdiction of any state or federal court located within Los
Angeles or San Francisco County, California, waives personal service
of any and all process upon it, consents to service of process by
registered mail directed to it at the address stated in Section 9.1,
and acknowledges that service so made shall be deemed to be
completed upon actual delivery thereof (whether accepted or
refused). In addition, each party consents and agrees that venue of
any action instituted under this Agreement or any agreement executed
in connection herewith shall be proper in Los Angeles or San
Francisco County, California, and hereby waives any objection to
venue.
Section 9.8 Successors and Assigns. Except as herein
otherwise specifically provided, this Agreement shall be binding
upon and inure to the benefit of the parties and their legal
representatives, successors and assigns.
Section 9.9. Captions. Captions contained in this Agreement
in no way define, limit or extend the scope or intent of this
Agreement.
Section 9.10 Severability. If any provision of this
Agreement, or the application of such provision to any person or
circumstance, shall be held invalid, the remainder of this
Agreement, or the application of such provision to the persons or
circumstances, shall not be affected thereby.
Section 9.11 Counterparts. This Agreement may be executed in
several counterparts, each of which shall be deemed an original, but
all of which shall constitute one and the same document.
Section 9.12 No Third Party Beneficiaries. Nothing in this
Agreement, expressed or implied, is intended to confer any rights or
remedies upon any person, other than the parties hereto and, subject
to the restrictions on assignment herein contained, their respective
successors and assigns.
Section 9.13 Certain Terminology.
A. Whenever the words "including", "include" or "includes" are
used in this Agreement, they should be interpreted in a
non-exclusive manner as though the words ",without limitation,"
immediately followed the same.
B. Except as otherwise indicated, all Article, Section and
Exhibit references in this Agreement shall be deemed to refer to the
Sections and Articles in, and the Exhibits to, this Agreement.
Section 9.14 Incorporation of Exhibits. All exhibits attached
and referred to in this Agreement are hereby incorporated herein as
fully set forth in (and shall be deemed to be a part of) this
Agreement.
Section 9.15 Consents and Approvals. Except as otherwise
expressly provided herein, any approval or consent provided to be
given by a party hereunder may be given or withheld in the absolute
discretion of such party and shall not be deemed to have been given
unless given in writing.
Section 9.16 Effectiveness. In no event shall any draft of
this Agreement create any obligation or liability, it being
understood that this Agreement shall be effective and binding only
when a counterpart hereof has been executed and delivered by each
party hereto.
IN WITNESS WHEREOF, the undersigned have executed this
Agreement as of the date first above written.
THIS AGREEMENT CONTAINS A BINDING ARBITRATION PROVISION
WHICH MAY BE ENFORCED BY THE PARTIES.
LIMITED PARTNER:
RW HOTEL INVESTMENT ASSOCIATES,
L.L.C.,
a Delaware limited liability
company
By: FARALLON CAPITAL MANAGEMENT,
INC.,
a Delaware corporation,
Manager
By:_______________________________
Name: ____________________________
Title: ___________________________
GENERAL PARTNER:
RIDGEWOOD HOTELS, INC.,
a Georgia corporation
By: ______________________________
Name: ____________________________
Title: ___________________________
ASSIGNMENT, ASSUMPTION AND WITHDRAWAL
The undersigned hereby confirms and agrees that:
(1) immediately prior to the foregoing amendment and
restatement: (a) RW Hotel Investment Partners, L.P. ("Assignor")
transferred (and hereby transfers) the interest of the "Limited
Partner" in the Partnership to RW Hotel Investments, L.L.C.
("Assignee"), (b) Assignor withdrew (and hereby withdraws) as a
partner in the Partnership, and (c) Assignee assumed (and hereby
assumes) all of the obligations and liability of Assignor as a
partner in the Partnership.
(2) Assignor no longer has any right, title and interest in
the Partnership (all the same having been assigned to Assignee).
ASSIGNEE:
RW HOTEL INVESTMENT PARTNERS,
L.P.,
a Delaware limited
partnership
By: RW HOTEL INVESTORS, INC.,
a Delaware corporation,
General Partner
By:_______________________________
Name:_____________________________
Title:____________________________
ASSIGNEE:
RW HOTEL INVESTMENT ASSOCIATES,
L.L.C.,
a Delaware limited liability
company
By: FARALLON CAPITAL MANAGEMENT,
INC.,
a Delaware corporation,
Manager
By: ______________________________
Name: ____________________________
Title: ___________________________
CONSENT AND RELEASE
The undersigned hereby consents to the foregoing assignment and
withdrawal and the substitution of the RW Hotel Investment
Associates, L.L.C. as the Limited Partner in the Partnership and
hereby releases RW Hotel Investment Partners, L.P. from any and all
liability under the foregoing Partnership Agreement or any other
document executed in connection therewith.
RIDGEWOOD HOTELS, INC.,
a Georgia corporation
By: ______________________________
Name: ____________________________
Title: ___________________________
AMENDED AND RESTATED LIMITED PARTNERSHIP AGREEMENT
Exhibits
A Business Plan and Budgets
B Certain Tax and Accounting Matters
C1 Form of General Partner Demand Note
C2 Form of Operator Demand Note
D Form of Endorsement
E Form of Pledge and Security Agreement
F Certain IRR Deficiency Calculations
G Appraisal Procedure
JOINDER
For good and valuable consideration, for the benefit of the
Partnership and Limited Partner, the undersigned joins in the
execution of this Agreement solely for the purpose of agreeing to be
bound by the representations, warranties and covenants set forth in
Section 5.4B and 5.4C of this Agreement.
OPERATOR:
RIDGEWOOD PROPERTIES, INC.,
a Delaware corporation
By: ______________________________
Name: ____________________________
Title: ___________________________
EXHIBIT "A"
DESCRIPTION OF BUSINESS PLAN AND BUDGETS
In addition to the Operating Budget and Rehab Budget, the
Business Plan to be attached as this Exhibit "A" shall detail the
overall plan for the acquisition, refurbishment, design,
development, construction, completion, operation and sale of the
Hotel Property, and shall contain the following matters:
1. A description of the proposed improvements and a tentative
schedule (based on events or time or both) for their completion and
outline for (a) obtaining the necessary zoning, variances and other
approval needed to construct such improvements, including projected
obligations associated therewith, and (b) any engineering,
feasibility, environmental impact or similar types of studies deemed
necessary or advisable to be conducted.
2. A general description and projected completion schedule of
all plans and specifications for all improvements within the Hotel
Project.
3. A general description of plans for any leasing of the
Hotel Project, including parameters for leasing (including
parameters as to the length of the term of proposed leases, the
minimum rental rates, the nature of the tenant, and the
creditworthiness of the tenant, and the amount and nature of any
improvements or other costs contemplated to be constructed or
incurred as the Partnership's expense with respect to such lease).
4. All other items or matters that may be appropriate for the
Hotel Project, including other items reasonably requested by Limited
Partner.
EXHIBIT "B"
CERTAIN TAX AND ACCOUNTING MATTERS
ARTICLE I CAPITAL ACCOUNTS
Section 1.1 Maintenance of Capital Accounts; General Rules.
A separate "Book Capital Account" (as defined in Section 1.2 of this
Exhibit "B") shall be maintained for each Partner in accordance with
the provisions of this Article I.
Section 1.2 Book Capital Accounts. A capital account (the
"Book Capital Account") for each Partner shall be maintained at all
times during the term of the Partnership in accordance with this
Section 1.2 and the capital accounting rules set forth in
Section 1.704-1(b)(2)(iv) of the Income Tax Regulations, as the same
may be amended from time to time ("Regulations"). The Partnership
shall make all adjustments required by said Section
1.704-1(b)(2)(iv), including, without limitation, the adjustments
contained in Section 1.704-1(b)(2)(iv)(g) of the Regulations
(relating to "Section 704(c) Property", as defined in
Section 2.3B(1) of this Exhibit "B"). In the event that at any time
during the term of the Partnership it shall be determined that the
Book Capital Accounts shall not have been maintained as required by
this Section 1.2, then said accounts shall be retroactively adjusted
so that the same shall conform to this Section 1.2.
A. Initial Book Basis of Partnership Property. The "Book
Basis" (as hereinafter defined) as of the date hereof of each item
of Partnership Property described in Schedule "1" hereof is as set
forth in said Schedule "1" opposite such item. As used herein,
"Book Basis" of an item of Partnership Property means the adjusted
basis of such item as reflected in the books of the Partnership,
determined and maintained in accordance with the capital accounting
rules contained in Section 1.704-1(b)(2)(iv) of the Regulations.
B. Initial Book Capital Accounts. As used herein, the
"Initial Book Capital Account" of each Partner means the Book
Capital Account as of the date hereof but following the making of
the contributions described in Section 3.1A of the Partnership
Agreement. The Initial Book Capital Account of each Partner as of
the date hereof shall be as follows:
Partner Book Capital Account
Limited Partner $16,335,000.00
General Partner $165,000.00
C. Optional Revaluations of Partnership Property. The
Partnership will not make the election to revalue Partnership
Property permitted under Section 1.704-1(b)(2)(iv)(f) of the
Regulations except as determined by the Partners.
D. Determination of Book Items. Consistent with the
provisions of Section 1.704-1(b)(2)(iv)(g)(3) of the Regulations:
(i) "Book Depreciation" (which means the depreciation, depletion or
amortization deduction or allowance that shall be allowable to the
Partnership with respect to an item of Partnership Property,
determined in the manner hereinafter set forth) for each item of
Partnership Property shall be the amount that bears the same
relationship to the "Adjusted Book Basis" (which means, with respect
to an item of Partnership Property, the Book Basis of such item as
the same may be adjusted from time to time by Book Depreciation
allowable with respect to such item of Partnership Property) of such
item of Partnership Property as the Tax Depreciation (as defined in
Section 2.3A) with respect to such item of Partnership Property for
such year bears to the "adjusted basis" (within the meaning of
Section 1011(a) of the Internal Revenue Code of 1986, as amended
[the "Code"]) of such item of Partnership Property; and (ii) "Book
Gain or Loss" shall be the gain or loss recognized by the
Partnership from the sale or other disposition of Partnership
Property (such gain or loss determined by reference to the Adjusted
Book Basis, and not the adjusted tax basis, of such property to the
Partnership). If an item of Partnership Property shall have an
"adjusted basis" (as defined in the preceding sentence) equal to
zero, Book Depreciation shall be determined under a reasonable
method, which method shall be selected by the Partnership.
E. Book Adjustments on Distributions. With respect to all
distributions of Partnership Property to the Partners, the
Partnership shall comply with the provisions contained in
Section 1.704-1(b)(2)(iv)(e) of the Regulations (relating to
adjustments to the Partners' Book Capital Accounts in connection
with such distributions) and all allocations and adjustments made in
connection therewith shall be in accordance with Article II of this
Exhibit "B".
ARTICLE II ALLOCATION OF INCOME, LOSSES AND DEDUCTIONS
FOR BOOK AND TAX PURPOSES
Section 2.1 Profits and Losses. Subject in all events to
Section 2.7 of this Exhibit "B", the "Profits" or "Losses" of the
Partnership (which means the Partnership's taxable income or loss,
respectively, as calculated in accordance with
Section 703(a) of the Code [with, however, (i) all items of income,
gain, loss or deduction required to be stated separately pursuant to
Section 703(a)(1) of the Code being included in such taxable income
or loss, (ii) any income and gain that is exempt from tax, and all
expenditures described in Section 705(a)(2)(B) of the Code (or
treated as expenditures so described pursuant to Section
1.704-1(b)(2)(iv)(i) of the Regulations) being included in such
Profits or Losses, (iii) Book Depreciation (and not Tax Depreciation
[as defined in Section 2.3A of this Exhibit "B"]) and all items of
Nonrecourse Deductions (as defined in Section 2.4C) being included
in calculating such Profits or Losses, and (iv) Book Gain or Loss
(and not Tax Gain or Loss [as defined in Section 2.3B of this
Exhibit "B"]) being included in calculating such Profits or Losses],
but excluding in such calculation the amounts allocated under
Sections 2.2, 2.3, 2.4 and 2.5 immediately below) for each fiscal
year of the Partnership, shall be allocated to the Partners in the
following order and priority:
A. Profits. If there shall be Profits for such fiscal year,
such Profits shall be allocated among the Partners as follows:
(i) first, to General Partner until there shall have been
allocated to General Partner pursuant to this Section 2.1A(i)
Profits equal to the excess, if any, of (X) the cumulative amount of
losses and deductions allocated to General Partner solely on account
of clause (ii) of Section 2.4A(1) hereof through and including such
fiscal year; over (Y) the cumulative amount of Profits allocated to
General Partner pursuant to this Section 2.1A(i) through and
including such fiscal year;
(ii) next, to the Partners (in proportion to the total of the
amounts to be allocated pursuant to this Section 2.1A(ii)) until
there shall have been allocated to each Partner pursuant to this
Section 2.1A(ii) Profits equal to the excess, if any, of (X) the
cumulative amount of losses and deductions allocated to such Partner
solely on account of clause (i) of Section 2.4A(1) hereof through
and including such fiscal year; over (Y) the cumulative amount of
Profits allocated to such Partner pursuant to this Section 2.1A(ii)
through and including such fiscal year;
(iii) next, to the Partners (in proportion to the total of
the amounts to be allocated pursuant to this Section 2.1A(iii))
until there shall have been allocated to each Partner Profits equal
to the excess, if any, of (X) the cumulative amount of Losses
allocated to such Partner pursuant to Section 2.1B(vi) hereof
through and including such fiscal year; over (Y) the cumulative
amount of Profits allocated to such Partner pursuant to this Section
2.1A(iii) through and including such fiscal year; and
(iv) next, to Limited Partner until there shall have been
allocated to Limited Partner Profits equal to the excess, if any, of
(X) the cumulative amount of Losses allocated to Limited Partner
pursuant to Section 2.1B(v) through and including such fiscal year;
over (Y) the cumulative amount of Profits allocated to Limited
Partner pursuant to this Section 2.1A(iv) through and including such
fiscal year;
(v) next, to General Partner until there shall have been
allocated to General Partner Profits equal to the excess, if any, of
(X) the lesser of (i) $165,000 (or, if greater, the aggregate cash
contributions actually made by General Partner to the Partnership
under Section 3.1 [it being understood that a demand note does not
constitute a cash contribution, but amounts paid by General Partner
to the Partnership pursuant to a demand note delivered under Section
3.1B of the Partnership Agreement constitute a cash contribution to
the Partnership under Section 3.1]) or (ii) the cumulative amount of
Losses allocated to General Partner pursuant to Section 2.1B(iv)
through and including such fiscal year; over (Y) the cumulative
amount of Profits allocated to General Partner pursuant to this
Section 2.1A(v) through and including such fiscal year; and
(vi) the remainder of such Profits shall be allocated among
the Partners in proportion to their respective relative Residual
Percentages.
B. Losses. If there shall be Losses for such fiscal year,
such Losses shall be allocated among the Partners as follows:
(i) first, to General Partner until there shall have been
allocated to General Partner pursuant to this Section 2.1B(i) Losses
equal to the excess, if any, of (X) the cumulative amount of income
and gain allocated to General Partner solely on account of clause
(ii) of Section 2.4A(1) hereof through and including such fiscal
year; over (Y) the cumulative amount of Losses allocated to General
Partner pursuant to this Section 2.1B(i) through and including such
fiscal year;
(ii) next, to the Partners (in proportion to the total of the
amounts to be allocated pursuant to this Section 2.1B(ii)) until
there shall have been allocated to the each Partner pursuant to this
Section 2.1B(ii) Losses equal to the excess, if any, of (X) the
cumulative amount of income and gain allocated to such Partner
pursuant to Section 2.5 hereof through and including such fiscal
year; and (Y) the cumulative amount of Losses allocated to such
Partner pursuant to this Section 2.1B(ii) through and including such
fiscal year;
(iii) next, to the Partners (in proportion to the total of the
amounts to be allocated pursuant to this Section 2.1B(iii)) until
there shall have been allocated to the each Partner Losses equal to
the excess, if any, of (X) the cumulative amount of Profits
allocated to such Partner pursuant to Section 2.1A(vi) hereof
through and including such fiscal year; and (Y) the cumulative
amount of Losses allocated to such Partner pursuant to this Section
2.1B(iii) through and including such fiscal year;
(iv) next, to General Partner until there shall have been
allocated to General Partner Losses equal to the excess, if any, of
(X) the cumulative amount of the contributions by General Partner to
the Partnership pursuant to Article III of the Partnership Agreement
(not including any contribution made pursuant to Article III(4) of
this Exhibit "B"); over (Y) the cumulative amount of Losses
allocated to General Partner pursuant to this Section 2.1B(iv), net
of the cumulative amount of Profits (if any) allocated to General
Partner pursuant to Section 2.1A(v), through and including such
fiscal year; and
(v) next, to Limited Partner until there shall have been
allocated to Limited Partner Losses equal to the excess, if any, of
(X) the cumulative amount of the contributions by Limited Partner to
the Partnership pursuant to Article III of the Partnership Agreement
(not including any contribution made pursuant to Article III(4) of
this Exhibit "B"); over (Y) the cumulative amount of Losses
allocated to Limited Partner pursuant to this Section 2.1B(v), net
of the cumulative amount of Profits (if any) allocated to Limited
Partner pursuant to Section 2.1A(iv), through and including such
fiscal year;
(vi) the remainder of such Losses shall be allocated among
the Partners in proportion to their respective relative Residual
Percentages.
Section 2.2 Allocation of Items of Gross Income. Subject in
all events to Section 2.7 of this Exhibit "B", for each fiscal year
of the Partnership, before any allocations of Profits or Losses
shall be made to the Partners pursuant to Section 2.1, there shall
first be allocated to the Partners items of gross income (without
duplication) in the following order and priority:
A. First, to Limited Partner until the cumulative amount of
the items of gross income allocated to Limited Partner pursuant to
this Section 2.2.A for the current and all prior fiscal years is
equal to the cumulative amount of the "Interest Component" (as
hereinafter defined) of the distributions made to Limited Partner
pursuant to Section 4.1.A of the Partnership Agreement for, or in
respect of, the current and all prior fiscal years.
For purposes of this Section 2.2.A, the "Interest Component"
of the distributions made to Limited Partner pursuant to Section
4.1.A of the Partnership Agreement shall mean the portion of each
such distribution that would have been characterized as interest if:
(i) the capital contributions described in Article III had been
treated as loans instead of as capital contributions; (ii) interest
on such loans had accrued at a rate equal to 15% per annum,
compounded quarterly; (iii) all cash previously distributed pursuant
to Section 4.1.A of the Partnership Agreement had been treated as
first applying to accrued interest on such loans; and (iv) the
assumptions set forth in Section B of Exhibit "F" had applied to
such loans.
B. Next, to the Partners until the cumulative amount of the
items of gross income allocated to each Partner pursuant to this
Section 2.2.B for the current and all prior fiscal years is equal to
the cumulative amount of the distributions made to such Partner
pursuant to Section 4.1.C of the Partnership Agreement for, or in
respect of, the current and all prior fiscal years. If, for any
fiscal year, there shall not be sufficient items of gross income to
fully accomplish the allocation required by the foregoing sentence,
such gross income as there is available for allocation under this
Section 2.2.B shall be allocated among the Partners under this
Section 2.2.B in the same proportions as gross income would
have been allocated among them under this Section 2.2.B if there had
been sufficient gross income to fully accomplish the allocation
required by this Section 2.2.B for such fiscal year.
Section 2.3 Tax Allocations.
A. Allocation of Tax Depreciation. Except to the extent
required by Section 704(c) of the Code or the regulations
promulgated thereunder, "Tax Depreciation" for each fiscal year of
the Partnership (which means the depreciation, depletion or
amortization deduction or allowance that shall be allowable for
federal income tax purposes to the Partnership with respect to an
item of Partnership Property) shall be allocated to the Partners in
the same manner that Book Depreciation shall have been allocated to
the Partners pursuant to Section 2.1 of this Exhibit "B".
B. Tax Gain or Loss. The gain or loss for federal income tax
purposes from the sale or other disposition of Partnership Property
("Tax Gain or Loss") for each fiscal year of the Partnership shall
be allocated to the Partners as provided in this Section 2.3. Tax
gain or loss for purposes of this Section shall be calculated (i)
without including any income from interest on any deferred portion
of the sale price and (ii) without including in the tax basis of the
Partnership Property any remaining special basis adjustment to
Partnership Property under Section 732(d) or 743 of the Code except
to the extent that such special basis adjustment is allocated to the
common basis of Partnership Property under Section 1.734-2(b)(1) of
the Regulations. The Partners agree that the tax effects of any
special basis adjustment that is not included in the calculation of
tax gain or loss in accordance with clause (ii) of the preceding
sentence shall be separately reflected in calculating the tax gain
or loss of the Partner or Partners to whom such special basis
adjustment relates.
(1) In General. In the case of "Section 704(c) Property" (as
hereinafter defined), Tax Gain or Loss (as the case may be) shall be
allocated in accordance with the requirements of Section 704(c) of
the Code and the Regulations thereunder and such other provisions of
the Code as govern the treatment of Section 704(c) Property. Any
gain or loss in excess of the amount allocated pursuant to the
preceding sentence (or, in the case of property which is not Section
704(c) Property, all Tax Gain or Loss) shall be allocated among all
the Partners in the same ratio that the book gain or loss with
respect to such property is allocated in accordance with Article II
of this Exhibit "B"; provided, however, in the event that there is
no book gain or loss, then any Tax Gain or Loss in excess of the
amount allocated pursuant to the preceding sentence shall be
allocated among the Partners in accordance with
Section 1.704-1(b)(3) of the Regulations. As used herein,
"Section 704(c) Property" means (1) each item of Partnership
Property which is contributed to the Partnership and to which
Section 704(c) of the Code or Section 1.704-1(b)(2)(iv)(d) of the
Regulations applies, and (2) each item of Partnership Property
which, as contemplated by Section 1.704-1(b)(4)(i) and other
analogous provisions of the Regulations, is governed by the
principles of Section 704(c) of the Code (or principles analogous to
the principles contained in Section 704(c) of the Code) by virtue of
(a) an increase or decrease in the Book Capital Accounts of the
Partners to reflect a revaluation of Partnership Property on the
Partnership's books as provided by Section 1.704-1(b)(2)(iv)(f) of
the Regulations, (b) the fact that it constitutes a receivable,
account payable, or other accrued but unpaid item which, under
principles analogous to those applying to an item of Partnership
Property having an adjusted tax basis that differs from its Book
Basis, is treated as an item of property described in
Section 1.704-1(b)(2)(iv)(g)(2) of the Regulations, (c) the
constructive liquidation and reconstruction of the Partnership under
Section 708(b)(1)(B) of the Code (see, e.g.,
Section 1.704-1(b)(2)(iv)(l) of the Regulations), or (d) any other
provision of the Code or the Regulations (including, without
limitation, Section 1.704-1(b)(4)(i) of the Regulations) as the same
may from time to time be construed, to the extent that, and for so
long as, such item of Partnership Property continues to be governed
by the principles of Section 704(c) of the Code (or principles
analogous to the principles contained in Section 704(c) of the
Code).
(2) Recapture Income. If, in the event of a gain on any
sale, exchange or other disposition of Partnership Property, all or
a portion of such gain is characterized as ordinary income
("Recapture") by virtue of the recapture rules of Section 1250,
Section 1245 or otherwise, then the Recapture shall be allocated
between or among the Partners in the same ratio that Tax
Depreciation allowable with respect to such Partnership Property had
been allocated between or among them; provided, however, that under
no circumstances shall there be allocated to any Partner Recapture
in excess of the gain allocated to such Partner under subsection A
above (and such excess shall be allocated instead between or among
the Partners as to which this proviso does not apply, in proportion
to the gain allocated between or among them).
(3) Other Items Relating to Section 704(c) Property. Any
item of income, gain, loss or deduction relating to an item of
Section 704(c) Property shall be allocated in accordance with the
requirements of Section 704(c) of the Code and the Regulations
thereunder and such other provisions of the Code as govern the
treatment of Section 704(c) Property and the related book item shall
be allocated in a manner consistent with the Regulations promulgated
under Section 704(b) of the Code.
Section 2.4 Exceptions.
A. Limitations.
(1) General Limitations. Notwithstanding anything to the
contrary contained in this Article II: (i) no allocation shall be
made to a Partner which would cause such Partner to have a deficit
balance in its Adjusted Book Capital Account which exceeds the sum
of such Partner's share of Partnership Minimum Gain and such
Partner's share of Partner Nonrecourse Debt Minimum Gain; and (ii)
for each fiscal year of the Partnership, at least 1% of each item of
Partnership income, gain, loss and deduction shall be allocated in
the aggregate to General Partner. Clause (ii) of the preceding
sentence shall take precedence over clause (i) thereof. Furthermore,
if the limitation contained in clause (i) of the first sentence of
this Section 2.4A(1) would apply to cause an item of loss or
deduction to be unavailable for allocation to the Partners, then
such item of loss or deduction shall be allocated to General
Partner.
(2) Partner Nonrecourse Deductions. Notwithstanding anything
to the contrary contained in this Article II hereof, any and all
items of loss and deduction and any and all expenditures described
in Section 705(a)(2)(B) of the Code (or treated as expenditures so
described pursuant to Section 1.704-1(b)(2)(iv)(i) of the
Regulations) (collectively, "Partner Nonrecourse Deductions") that
are (in accordance with the principles set forth in
Section 1.704-2(i)(2) of the Regulations) attributable to Partner
Nonrecourse Debt shall be allocated to the Partner that bears the
Economic Risk of Loss for such Partner Nonrecourse Debt. If more
than one Partner bears such Economic Risk of Loss, such Partner
Nonrecourse Deductions shall be allocated between or among such
Partners in accordance with the ratios in which they share such
Economic Risk of Loss. If more than one Partner bears such Economic
Risk of Loss for different portions of a Partner Nonrecourse Debt,
each such portion shall be treated as a separate Partner Nonrecourse
Debt.
B. Minimum Gain Chargebacks.
(1) Partnership Minimum Gain. Except to the extent provided
in Section 1.704-2(f)(2), (3), (4) and (5) of the Regulations, if
there is, for any fiscal year of the Partnership, a net decrease in
Partnership Minimum Gain, there shall be allocated to each Partner,
before any other allocation pursuant to Article II hereof is made
under Section 704(b) of the Code of Partnership items for such
fiscal year, items of income and gain for such year (and, if
necessary, for subsequent years) equal to such Partner's share of
the net decrease in Partnership Minimum Gain. A Partner's share of
the net decrease in Partnership Minimum Gain is the amount of such
total net decrease multiplied by the Partner's percentage share of
the Partnership's minimum gain at the end of the immediately
preceding taxable year, determined in accordance with
Section 1.704-2(g)(1) of the Regulations. Items of income and gain
to be allocated pursuant to the foregoing provisions of this
Section 2.4B(1) shall consist first of gains recognized from the
disposition of items of Partnership Property subject to one or more
Nonrecourse Liabilities of the Partnership, and then of a pro rata
portion of the other items of Partnership income and gain for that
year.
(2) Partner Nonrecourse Debt Minimum Gain. Except to the
extent provided in Section 1.704-2(i)(4) of the Regulations, if
there is, for any fiscal year of the Partnership, a net decrease in
Partner Nonrecourse Debt Minimum Gain, there shall be allocated to
each Partner that has a share of Partner Nonrecourse Debt Minimum
Gain at the beginning of such fiscal year before any other
allocation pursuant to Article II hereof (other than an allocation
required pursuant to Section 2.4B(1)) is made under Section 704(b)
of the Code of Partnership items for such fiscal year, items of
income and gain for such year (and, if necessary, for subsequent
years) equal to such Partner's share of the net decrease in the
Partner Nonrecourse Debt Minimum Gain. The determination of a
Partner's share of the net decrease in Partner Nonrecourse Debt
Minimum Gain shall be made in a manner consistent with the
principles contained in Section 1.704-2(g)(1) of the Regulations.
The determination of which items of income and gain to be allocated
pursuant to the foregoing provisions of this Section 2.4B(2) shall
be made in a manner that is consistent with the principles contained
in Section 1.704-2(f)(6) of the Regulations.
C. Certain Defined Terms. For purposes of this Exhibit "B":
(i) "Partner Minimum Gain" shall have the meaning set forth in
Section 1.704-2(b)(2) of the Regulations; (ii) "Partner Nonrecourse
Debt" shall have the meaning set forth in Section 1.704(b)-2(b)(4)
of the Regulations; (iii) "Partner Nonrecourse Debt Minimum Gain"
shall have the meaning set forth in Section 1.704-2(i)(2) of the
Regulations; (iv) "Nonrecourse Liability" shall have the meaning set
forth in Section 1.704-2(b)(3) of the Regulations; (v) "Adjusted
Book Capital Account" means the Book Capital Account of a Partner
reduced by any adjustments, allocations or distributions described
in Section 1.704-1(b)(2)(ii)(d)(4), (5) or (6) of the Regulations;
(viii) "Economic Risk of Loss" shall have the meaning set forth in
Section 1.752-2(b)-(j) of the Regulations; and (ix) "Nonrecourse
Deductions" shall have the meaning set forth in
Section 1.704-2(b)(1) of the Regulations.
Section 2.5 Qualified Income Offset. Notwithstanding
anything to the contrary in this Exhibit "B", in the event any
Partner unexpectedly receives any adjustments, allocations or
distributions described in Section 1.704-1(b)(2)(ii)(d)(4), (5), or
(6) of the Regulations, there shall be specially allocated to such
Partner such items of Partnership income and gain, at such times and
in such amounts as will eliminate as quickly as possible the deficit
balance (if any) in its Book Capital Account (in excess of the sum
of such Partner's share of Partner Minimum Gain and such Partner's
share of Partner Nonrecourse Debt Minimum Gain) created by such
adjustments, allocations or distributions. To the extent permitted
by the Code and the Regulations, any special allocations of items of
income or gain pursuant to this Section 2.5 shall be taken into
account in computing subsequent allocations of Profits or Losses
pursuant to this Article II, so that the net amount of any items so
allocated and the subsequent Profits or Losses allocated to the
Partners pursuant to this Article II shall, to the extent possible,
be equal to the net amounts that would have been allocated to each
such Partner pursuant to the provisions of this Article II if such
unexpected adjustments, allocations or distributions had not
occurred.
Section 2.6 Partners' Interests in Partnership Profits for
Purposes of Section 752. As permitted by Section 1.752-3(a)(3) of
the Regulations, the Partners hereby specify that solely for
purposes of determining their respective shares of excess
Nonrecourse Liabilities of the Partnership, the Partners' respective
shares of Partnership profits shall be equal to their respective
Residual Percentages.
Section 2.7 Compliance with Section 514(c)(9)(E) of the Code.
Notwithstanding anything to the contrary contained in Section 2.1 or
Section 2.2 of this Exhibit "B":
A. General Limitation. Under no circumstance shall Limited
Partner be allocated in any fiscal year more than 88% of the
"overall partnership income" of the Partnership (within the meaning
of Section 514(c)(9)(E)(i)(I) of the Code and Section
1.514(c) 2(c)(1) of the Regulations) or less than 88% of the
"overall partnership loss" of the Partnership (within the meaning of
Section 514(c)(9)(E)(i)(I) of the Code and Section 1.514 2(c)(1) of
the Regulations). For these purposes, the Partners agree that, in
accordance with the provisions of Section 1.514(c) 2(d) of the
Regulations, the gross income allocation contained in Section 2.2A
of this Exhibit "B" shall be disregarded in determining "overall
partnership income" and "overall partnership loss" as it constitutes
a "reasonable preferred return" on the capital of Limited Partner.
B. Special Chargebacks. If any item of income shall be
allocated to General Partner solely by application of Section 2.7A
of this Exhibit "B", items of deduction or loss of the Partnership
shall be allocated to General Partner as soon as possible in a
manner that is consistent with the provisions of Section
514(c)(9)(E)(ii)(I) of the Code and Section 1.514(c) 2(e) to
chargeback and offset the effects of such prior allocation of income
to General Partner. If any item of deduction or loss shall be
allocated to Limited Partner solely by application of Section 2.7A
of this Exhibit "B", items of income or gain of the Partnership
shall be allocated to Limited Partner as soon as possible in a
manner that is consistent with the provisions of Section
514(c)(9)(E)(ii)(I) of the Code and Section 1.514(c) 2(e) to
chargeback and offset the effects of such prior allocation of
deduction or loss to Limited Partner.
C. Intent. The provisions of the Partnership Agreement and
this Exhibit "B" shall be interpreted consistent with the Partners'
intent that the allocations contained herein are "permitted
allocations" under Section 514(c)(9)(E) of the Code and the
Regulations thereunder. General Partner agrees to make such
amendments or changes to the Partnership Agreement or this Exhibit
"B" as are reasonably requested by Limited Partner to effectuate
this intent; provided, however, that the same shall not have a
material adverse effect upon General Partner.
ARTICLE III TAX AND ACCOUNTING MATTERS
(1) The Partnership will be on the accrual basis for both tax
and accounting purposes.
(2) The Partnership books and records shall be prepared in
accordance with tax accounting principles, consistently applied.
Such books and records shall be audited by such certified public
accountants as selected by the Partners, at least annually and at
such other times as are determined by Partners.
(3) The fiscal year of the Partnership shall end on the 31st
day of December in each year.
(4) General Partner shall comply with the requirements
contained in Section 1446 of the Code and comparable tax laws of any
other State in which the Partnership is engaged in business
(regarding income tax withholding on certain income that is
allocated to Partners who are non-U.S. persons) and any successor or
replacement provision or provisions of law or administrative
guidance (the "Foreign Partner Withholding Law"). General Partner
is hereby authorized and directed by each Partner to withhold from
the distributions or other amounts payable to such Partner under the
Partnership Agreement such amount or amounts ("Required Foreign
Partner Withholding") as General Partner reasonably determines are
required by the Foreign Partner Withholding Law, and to remit the
Required Foreign Partner Withholding to the Internal Revenue Service
and/or such other applicable State taxing agency at such time or
times as may from time to time be required by the relevant taxing
authority. If General Partner determines at any time that the
Required Foreign Partner Withholding with respect to a particular
Partner exceeds the amount of distributions or other amounts payable
to such Partner at such time (a "Cash Shortfall"), the Partner in
question shall immediately make a cash contribution to the
Partnership equal to the amount of such Cash Shortfall, which
General Partner shall use to effectuate the Required Foreign Partner
Withholding. When remitting the Required Foreign Partner
Withholding, General Partner shall inform the relevant taxing
authority of the name and tax identification number of the Partner
for whose account such Required Foreign Partner Withholding is being
made. In complying with the provisions of this paragraph, General
Partner shall be entitled to presume irrebuttably that a Partner is
subject to the Foreign Partner Withholding Law unless: (i) Such
Partner shall have previously provided General Partner with a
completed and signed certificate of non-foreign status, in the Form
attached as Schedule "2", such certificate was furnished to General
Partner not earlier than during the third taxable year of the
Partnership preceding the taxable year under consideration, General
Partner has not been notified by such partner that its status under
such certificate has changed, and General Partner does not have
actual knowledge that the status of such Partner under such
certificate has changed; or (ii) General Partner reasonably
determines, based upon all facts and circumstances (including,
without limitation, the provisions contained in Revenue Procedure
89-31, 1989-1 Cum. Bull. 895, or any successor Revenue Procedure,
guideline or administrative pronouncement), that the Foreign Partner
Withholding Law does not apply in a particular instance.
(5) All federal and state income tax returns of the
Partnership shall be prepared by such certified public accountants
as are selected by the Partners. Tax audits and litigation shall be
conducted under the direction of General Partner. The determination
of whether the Partnership shall make available elections for
federal, state or local income tax purposes shall be made by the
Partners. General Partner is hereby designated as the "tax matters
partner" for the Partnership (as such term is defined in
Section 6231(a)(7) of the Code).
ARTICLE IV LIQUIDATING DISTRIBUTIONS; DEFICIT FUNDING
OBLIGATION
(1) Notwithstanding anything to the contrary contained in
this Exhibit "B" or in the Partnership Agreement, in the event the
Partnership is "liquidated" within the meaning of Section
1.704 1(b)(2)(ii)(g) of the Regulations, liquidating distributions
shall be made, in compliance with Section 1.704 1(b)(2)(ii)(b)(2) of
the Regulations, only to the Partners, if any, who have positive
Book Capital Account balances (or in the ratio of such positive Book
Capital account balances, if more than one Partner shall have a
positive Book Capital Account balance and the amount to be
distributed is less than the sum of the positive Book Capital
Account balances). In the event any Partner's interest in the
Partnership is "liquidated" within the meaning of Section 1.761 1(d)
of the Regulations, liquidating distributions, if any, shall be made
to such Partner in the same amounts and at the same times as would
have been made to such Partner if the Partnership itself were being
"liquidated". For purposes of this Article IV, Book Capital Account
balances shall be determined after applying the provision set forth
in Section 1.2E of this Exhibit "B".
(2) Notwithstanding anything to the contrary contained in
this Exhibit "B" or in the Partnership Agreement, no Partner shall
be at any time obligated to restore all or any portion of a deficit
balance in such Partner's Book Capital Account.
ARTICLE V ORDER OF APPLICATION
For purposes of this Exhibit "B", the following provisions set
forth in the Partnership Agreement and this Exhibit "B" shall be
applied in the following order:
A. Article IV of the Partnership Agreement relating to
distributions, in the case of distributions other than distributions
to which Article IV applies.
B. Section 2.4A(1) of this Exhibit "B" relating to general
limitations.
C. Section 2.4A(2) of this Exhibit "B" relating to Partner
Nonrecourse Deductions.
D. Section 2.4B(1) of this Exhibit "B" relating to
chargebacks of Partnership Minimum Gain.
E. Section 2.4B(2) of this Exhibit "B" relating to
chargebacks of Partner Nonrecourse Debt Minimum Gain.
F. Section 2.5 of this Exhibit "B" relating to qualified
income offset.
G. Section 2.2 of this Exhibit "B" relating to allocations of
items of gross income (adjusted, as appropriate, by Section 2.7).
H. Section 2.1 of this Exhibit "B" relating to allocations of
Profits and Losses (adjusted, as appropriate, by Section 2.7).
I. Article IV of this Exhibit "B", in the case of liquidating
distributions.
These provisions shall be applied as if all contributions,
distributions and allocations with respect to a given fiscal year
were made at the end of the Partnership's fiscal year. Where any
provision depends on the Book Capital Account of any Partner, such
Book Capital Account shall be determined after the application of
all preceding provisions for the year.
ARTICLE VI CLOSING OF PARTNERSHIP BOOKS IN CONNECTION
WITH ADMISSION OF NEW PARTNER OR TRANSFER OF PARTNERS'S INTEREST
Upon the effective date (the "Effective Date") of the
admission of a new partner into the Partnership or of a valid
transfer of all or part of a Partner's interest in the Partnership
pursuant to Article VI of the Partnership Agreement, the books of
the Partnership shall be closed in accordance with Section 706(d) of
the Code, and consistent therewith: (X) items of income, deduction,
gain, loss and/or credit of the Partnership that are recognized
prior to the Effective Date shall be allocated among those persons
or entities who were Partners in the Partnership prior to the
Effective Date; and (Y) items of income, deduction, gain, loss
and/or credit of the Partnership that are recognized after the
Effective Date shall be allocated among the persons or entities who
were Partners after the Effective Date.
SCHEDULE "1" TO Exhibit "B"
Partnership Property Book Basis As of Closing Date
The Hotel Property $16,200,000.00
Cash $300,000.00
SCHEDULE "2" TO Exhibit "B"
[INDIVIDUAL]
CERTIFICATION OF NON-FOREIGN STATUS
Section 1446 of the Internal Revenue Code provides that a
partnership must pay a withholding tax to the Internal Revenue
Service with respect to a partner's allocable share of the
partnership's effectively connected taxable income. To inform RW
Hotel Partners, L.P. (the "Partnership") that the provisions of
Section 1446 do not apply, I _______________________________ hereby
certify the following:
1. I am not a nonresident alien for purposes of U.S. income
taxation.
2. My U.S. taxpayer identification number (social security
number) is _________________.
3. My home address is:
_______________________________________________
_______________________________________________
_______________________________________________
I hereby agree that if I become a nonresident alien, I will notify
the Partnership within sixty (60) days of doing so. I understand
that this certification may be disclosed to the Internal Revenue
Service by the Partnership and that any false statement contained
herein could be punished by fine, imprisonment, or both.
Under penalties of perjury, I declare that I have examined
this certification and to the best of my knowledge and belief it is
true, correct and complete.
Executed as of the ____ day of _________ , 19__, at
______________________.
__________________________________
[ENTITY]
CERTIFICATION OF NON-FOREIGN STATUS
Section 1446 of the Internal Revenue Code provides that a
partnership must pay a withholding tax to the Internal Revenue
Service with respect to a partner's allocable share of the
partnership's effectively connected taxable income. To inform RW
Hotel Partners, L.P. (the "Partnership") that the provisions of
Section 1446 do not apply, the undersigned hereby certifies on
behalf of _____________________________ the following:
1. _____________________________ is not a foreign
corporation, foreign partnership, foreign trust, or foreign estate
(as those terms are defined in the Internal Revenue Code and Income
Tax Regulations);
2. ______________________'s U.S. taxpayer identification
number is ____________________________.
3. _____________________________'s office address is:
_______________________________________________
_______________________________________________
_______________________________________________
_______________________________________________
_______________________________ hereby agrees to notify the
Partnership within sixty (60) days of the date
_______________________________ becomes a foreign person.
_______________________________ understands that this certification
may be disclosed to the Internal Revenue Service by the Partnership
and that any false statement contained herein could be punished by
fine, imprisonment, or both.
Under penalties of perjury, I declare that I have examined
this certification and to the best of my knowledge and belief it is
true, correct and complete, and I further declare that I have
authority to sign this document on behalf of
_______________________________________.
Executed as of the ___ day of __________, 19__, at
_______________________________.
_____________________________
EXHIBIT "C-1"
FORM OF GENERAL PARTNER DEMAND NOTE
$________________ ____________, 19__
FOR VALUE RECEIVED, the undersigned, RIDGEWOOD HOTELS, INC., a
Georgia corporation ("Maker"), hereby promises to pay to the order
of RW HOTEL PARTNERS, L.P., a Delaware limited partnership
("Lender"), on demand, or in the event no demand has theretofore
been made, on December 31, 2000, (the "Maturity Date"), the amount
of _______________________________ and all accrued but unpaid
interest thereon. The outstanding principal amount hereof shall
bear interest until the Maturity Date at the "Applicable Federal
Rate" (as defined in Section 7872(f)(2)(B) of the Internal Revenue
Code of 1986, as amended). Interest accruing under this Note shall
be compounded semi-annually and shall be computed on the basis of a
365-day year and the actual number of days elapsed in the period
during which it accrues and, if not paid in advance, shall be
payable on demand or at the Maturity Date.
If any payment hereunder shall be due on a legal holiday under
the laws of the State of Delaware or any other day on which
commercial banks in the City of Dover, Delaware, are obligated or
authorized by law to close, such payment shall be made on the next
succeeding business day, and such additional time shall be included
in computing interest in connection with such payment.
All payments hereunder are payable in lawful money of the
United States of America to Lender (at such address or location as
the then holder of this Note may specify from time to time in
writing) in immediately available funds. This Note shall be
governed by and construed and enforced in accordance with the laws
of the State of Delaware. No provision of this Note shall alter or
impair the obligation of Maker, which is absolute and unconditional,
to pay the principal of and interest on this Note in the manner
herein prescribed. Maker and any endorsers of this Note hereby
consent to renewals and extensions of time at or after the maturity
hereof, without notice, and hereby waive diligence, presentment for
payment, demand, notice of dishonor and protest of this Note and
further agree that none of the terms or provisions of this Note may
be waived, altered, modified or amended except as Lender may consent
thereto in a writing duly signed for and on its behalf. If this
Note is not paid when due, Maker promises to pay all costs of
enforcement and collection, including but not limited to, reasonable
attorney's fees and costs, whether or not any action or proceeding
is brought to enforce the provisions hereof.
IN WITNESS WHEREOF, Maker has executed this Note as of the
date first written above and delivered it to Lender.
RIDGEWOOD HOTELS, INC.,
a Georgia corporation
By:_______________________________
Name:_____________________________
Title:____________________________
EXHIBIT "C-2"
FORM OF OPERATOR DEMAND NOTE
$__________________ __________, 19__
FOR VALUE RECEIVED, the undersigned, RIDGEWOOD PROPERTIES,
INC., a Delaware corporation ("Maker"), hereby promises to pay to
the order of RIDGEWOOD HOTELS, INC., a Georgia corporation
("Lender"), on demand, or in the event no demand has theretofore
been made, on December 31, 2000, (the "Maturity Date"), the amount
of _______________________________ and all accrued but unpaid
interest thereon. The outstanding principal amount hereof shall
bear interest until the Maturity Date at the "Applicable Federal
Rate" (as defined in Section 7872(f)(2)(B) of the Internal Revenue
Code of 1986, as amended). Interest accruing under this Note shall
be compounded semi-annually and shall be computed on the basis of a
365-day year and the actual number of days elapsed in the period
during which it accrues and, if not paid in advance, shall be
payable on demand or at the Maturity Date.
If any payment hereunder shall be due on a legal holiday under
the laws of the State of Delaware or any other day on which
commercial banks in the City of Dover, Delaware, are obligated or
authorized by law to close, such payment shall be made on the next
succeeding business day, and such additional time shall be included
in computing interest in connection with such payment.
All payments hereunder are payable in lawful money of the
United States of America to Lender (at such address or location as
the then holder of this Note may specify from time to time in
writing) in immediately available funds. This Note shall be
governed by and construed and enforced in accordance with the laws
of the State of Delaware. No provision of this Note shall alter or
impair the obligation of Maker, which is absolute and unconditional,
to pay the principal of and interest on this Note in the manner
herein prescribed. Maker and any endorsers of this Note hereby
consent to renewals and extensions of time at or after the maturity
hereof, without notice, and hereby waive diligence, presentment for
payment, demand, notice of dishonor and protest of this Note and
further agree that none of the terms or provisions of this Note may
be waived, altered, modified or amended except as Lender may consent
thereto in a writing duly signed for and on its behalf. If this
Note is not paid when due, Maker promises to pay all costs of
enforcement and collection, including but not limited to, reasonable
attorney's fees and costs, whether or not any action or proceeding
is brought to enforce the provisions hereof.
IN WITNESS WHEREOF, Maker has executed this Note as of the
date first written above and delivered it to Lender.
RIDGEWOOD PROPERTIES, INC.,
a Delaware corporation
By:_______________________________
Name: ____________________________
Title:____________________________
EXHIBIT "D"
FORM OF ENDORSEMENT
ENDORSEMENT ATTACHED TO THAT CERTAIN PROMISSORY NOTE,
captioned "NEGOTIATE DEMAND PROMISSORY NOTE", dated ______________,
19____, made by RIDGEWOOD PROPERTIES, INC., a Delaware corporation
("Maker"), to the order of RIDGEWOOD HOTELS, INC., a Georgia
corporation ("Lender"), in the original principal amount of
__________________________ Dollars ($________________).
PAY TO THE ORDER OF
RW HOTEL PARTNERS, L.P.,
a Delaware limited partnership
RIDGEWOOD HOTELS, INC.
a Georgia corporation
By:___________________________
Name:_________________________
Its:___________________________
EXHIBIT "E"
FORM OF PLEDGE AGREEMENT
PLEDGE, ASSIGNMENT AND SECURITY AGREEMENT
THIS PLEDGE, ASSIGNMENT AND SECURITY AGREEMENT (this "Pledge
Agreement") is entered into as of _______________________, 1995, by
and between RIDGEWOOD HOTELS, INC., a Georgia corporation
("Pledgor"), and RW HOTEL PARTNERS, L.P., a Delaware limited
partnership ("Secured Party"), on the following terms and
conditions:
RECITALS:
A. Pledgor, as general partner, and RW Hotel Investment
Partners, L.P., a Delaware limited partnership, as limited partner,
are partners in Secured Party.
B. Secured Party is governed by that certain partnership
agreement captioned "AMENDED AND RESTATED LIMITED PARTNERSHIP
AGREEMENT OF RW HOTEL PARTNERS, L.P." dated as of August 16, 1995
(the "Partnership Agreement"). Unless otherwise defined herein, all
terms used in a capitalized manner herein shall have the meaning set
forth in the Partnership Agreement.
C. The Partnership Agreement requires the execution and
delivery of this Pledge Agreement by Pledgor.
NOW, THEREFORE, in consideration of the Recitals, the mutual
promises contained herein, and other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, Pledgor and Secured Party agree as follows:
1. Certain Defined Terms and Related Matters. As used
herein, the following terms shall have the meanings indicated:
"Collateral" shall have the meaning assigned to such term in
Section 2 hereof.
"Cure Period" shall have the meaning assigned to such term in
the Partnership Agreement.
"Event of Default" shall have the meaning assigned to such
term in Section 8 hereof.
"General Partner Demand Note" means the General Partner Demand
Notes described in Exhibit "A" attached hereto and made a part
hereof, together with any additional General Partner Demand Notes
delivered by Pledgor pursuant to Section 3.1B of the Partnership
Agreement, collectively.
"Loan Documents" means (a) the General Partner Demand Notes;
(b) the UCC-1 financing statements; (c) this Pledge Agreement; and
(d) any and all other documents executed by Pledgor and evidencing,
securing, governing or otherwise pertaining to the Obligations, as
each may be modified, amended, extended, or renewed from time to
time.
"Obligations" shall have the meaning assigned to such term in
Section 3 hereof.
"Operator Demand Notes" means the Operator Demand Notes
described in Exhibit "B" attached hereto and made a part hereof,
together with any additional Operator Demand Notes delivered by
Operator pursuant to Section 3.1B of the Partnership Agreement,
collectively.
"Pledge Agreement" means this Pledge Agreement.
"UCC" means the Uniform Commercial Code as adopted in the
State of Delaware.
Unless otherwise defined herein, the terms in Article 9 of the UCC
are used herein as therein defined.
2. Grant of Security Interest. Pledgor hereby assigns and
pledges to Secured Party, and hereby grants to Secured Party a
security interest in, all of Pledgor's right, title and interest in
and to the Operator Demand Notes, whether now owned or hereafter
acquired by Pledgor, any rights, remedies, or claims with respect
thereto, and any amendments thereof, additions thereto, or
replacements or substitutions therefor, and all proceeds, in cash or
otherwise, of the foregoing (collectively, the "Collateral"):
3. Security for Obligations. This Pledge Agreement secures
the prompt and complete payment and performance of all obligations,
covenants and conditions of Pledgor now or hereafter existing under
the (a) the General Partner Demand Notes; and (b) the Loan
Documents, as each may be modified, amended, extended, or renewed
from time to time (being hereinafter collectively referred to as
the "Obligations").
4. Delivery of Collateral and Other Documents. Immediately
upon the execution hereof, Pledgor shall deliver to Secured Party
the following:
(a) Operator Demand Notes. The original executed Operator
Demand Notes described on Exhibit "B" attached hereto and made a
part hereof, endorsed by Pledgor payable to the order of Secured
Party; and
(b) Additional Documents. As and when any additional General
Partner Demand Note is delivered by Pledgor pursuant to Section 3.1B
of the Partnership Agreement, Pledgor shall deliver a supplement to
Exhibits "A" and "B" to this Pledge Agreement, in the form required
by the Partnership Agreement (adding such General Partner Demand
Note to Exhibit "A" and the related Operator Demand Note to Exhibit
"B"), together with the executed original of such General Partner
Demand Note and the original executed related Operator Demand Note,
endorsed by Pledgor payable to the order of Secured Party.
5. Releases. Upon full payment and satisfaction of any
General Partner Demand Note, Secured Party shall release the related
Operator Demand Note from the security interest and assignment
created hereunder and Secured Party shall deliver to Pledgor, or to
an escrow satisfactory to Secured Party for delivery to Pledgor, the
related Operator Demand Note with endorsement back to Pledgor,
without recourse or warranty.
6. Further Assurances.
6.1 Financing Statements: Further Instruments and Documents.
Pledgor authorizes Secured Party to file Uniform Commercial Code
financing statements (including, without limitation, Form UCC-1,
Form UCC-2 or Form UCC-3, as the case may be) in such offices and
locations as are necessary or advisable in the opinion of Secured
Party to perfect the security interests granted herein. Pledgor
further agrees that from time to time and at the expense of Pledgor,
Pledgor will promptly execute and deliver all further instruments
and documents, end take all further action that may be necessary or
desirable, or that Secured Party reasonably may request, in order to
perfect and protect any security interests renewed and extended or
granted or purported to be granted hereby or to enable Secured Party
to exercise and enforce its rights and remedies hereunder with
respect to any of the Collateral, including, without limitation, the
filing of any financing or continuation statements under the UCC or
the Uniform Commercial Code as in effect in any other jurisdiction
with respect to the security interests created hereby. If any
amount payable under or in connection with any of the Collateral
shall be or shall become evidenced by any instrument, such
instrument shall be delivered to Secured Party, duly endorsed in a
manner satisfactory to Secured Party (but without recourse or
warranty), to be held as Collateral pursuant to this Pledge
Agreement.
6.2 Pledge Agreement as Financing Statement. Pledgor
authorizes Secured Party to file a carbon, photographic, or other
reproduction of this Pledge Agreement as a financing statement or to
file one or more financing or continuation statements, and
amendments thereto, relative to all or any part of the Collateral
without the signature of Pledgor where permitted by law, and the
same shall be sufficient as a financing statement for filing in any
such jurisdiction.
6.3 Amendments of Collateral. Pledgor will deliver to
Secured Party immediately upon the execution and delivery thereof
any amendments, renewals, extensions, replacements and substitutions
to, of or for any of the Collateral (but the foregoing shall not be
construed to authorize Pledgor to agree to any of such amendments,
renewals, extensions, replacements and substitutions), and any other
additional documents, instruments, agreements and other information
relating to the Collateral.
7. Rights of Secured Party.
7.1 Secured Party's Appointment as Attorney-in-Fact.
(a) Pledgor hereby irrevocably constitutes and appoints
Secured Party and any officer or agent thereof, with full power of
substitution, as its true and lawful attorney-in-fact with full
irrevocable power and authority in the place and stead of Pledgor
and in the name of Pledgor or in its own name, from time to time, or
in Secured Party's discretion, for the purpose of carrying out the
terms of this Pledge Agreement, and the other Loan Documents, to
take any and all appropriate action and to execute any and all
documents and instruments which may be necessary or appropriate to
accomplish the purpose of this Pledge Agreement and the other Loan
Documents, and, without limiting the generality of the foregoing,
Pledgor hereby grants Secured Party the power and rights on behalf
of Pledgor, without notice to or assent by Pledgor, to do the
following:
(i) During the existence of any Event of Default, in the name
of Pledgor or in its own name, or otherwise, to take possession of
and indorse and collect any checks, drafts, notes, acceptances, or
other instruments for the payment of monies due under, or with
respect to, any of the Operator Demand Notes or any of the other
Collateral, and to file any claim or to take any other action or
proceeding in any court of law or equity or otherwise deemed
appropriate by Secured Party for the purpose of collecting any and
all such moneys due or with respect to Operator Demand Notes or
other Collateral whenever payable; and
(ii) During the existence of any Event of Default, (A) to
direct any party liable for any payment under any Operator Demand
Note or other Collateral to make payment of any and all monies due
or to become due thereunder directly to Secured Party or as Secured
Party shall direct; (B) to ask or demand for, collect, receive
payment of and receipt for, any and all monies, claims, and other
amounts due or to become due at any time in respect of or arising
out of any Operator Demand Note or other Collateral; (C) to sign and
indorse any drafts against debtors, assignments, verifications,
notices, and other documents in connection with any Operator Demand
Note or other Collateral; (D) to commence and prosecute any suits,
actions, or proceedings at law or in equity in any court of
competent jurisdiction to collect the Operator Demand Notes and
other Collateral or any part thereof and to enforce any other rights
in respect of other Collateral; (E) to defend any suit, action, or
proceeding brought against Pledgor with respect to any of the
Collateral; (F) to settle, compromise, or adjust any suit, action,
or proceeding described in the preceding clause and, in connection
therewith, to give such discharges or releases as Secured Party may
deem appropriate; and (G) generally, to sell, transfer, pledge, and
make any agreement with respect to or otherwise deal with any
Operator Demand Note or other Collateral as fully and completely as
though Secured Party were the absolute owner thereof for all
purposes, and to do, at Secured Party's option and Pledgor's
expense, at any time, or from time to time, all acts and things
which Secured Party deems necessary to protect, preserve, or realize
upon the Promotor Partner Demand Notes and other Collateral and the
security interests of Secured Party therein and to effect the
interest of this Pledge Agreement and the other Loan Documents, all
as fully and effectively as Pledgor might do.
Pledgor hereby ratifies all that said attorney shall lawfully
do or cause to be done by virtue hereof. This power of attorney is
a power coupled with an interest and shall be irrevocable.
(b) Pledgor also authorizes Secured Party, at any time and
from time to time, to execute any endorsements, assignments, or
other instruments of conveyance or transfer with respect to the
Collateral.
7.2 Secured Party May Perform. If Pledgor fails to perform
any agreement contained herein, then Secured Party may itself
perform, or cause performance of, such agreement, and the expenses
of Secured Party incurred in connection therewith shall be payable
by Pledgor upon demand by Secured Party, together with interest
thereon from the date advanced at the rate set forth in the General
Partner Demand Notes.
7.3 No Duty. The powers conferred on Secured Party hereunder
are solely to protect its interest in the Collateral and shall not
impose any duty upon Secured Party to exercise any such powers.
Except for the safe custody of any Operator Demand Notes or other
Collateral in its possession and the accounting for amounts actually
received by it hereunder, Secured Party shall not have any duty as
to any Operator Demand Notes or other Collateral or as to the taking
of any necessary steps to preserve rights against prior parties or
any other rights pertaining to any Operator Demand Notes or other
Collateral.
8. Events of Default. Any of the following shall constitute
an event of default ("Event of Default") hereunder: (a) a
Bankruptcy/Dissolution Event with respect to Pledgor or any partner
thereof; or (b) the failure by Pledgor or any Affiliate thereof to
pay any amount when due under the Partnership Agreement, any
Collateral Agreement or any of the Loan Documents, if the same
remains unpaid within the Cure Period; or (c) any other breach or
default by Pledgor or any Affiliate thereof under the Partnership
Agreement, Basic Agreement, any Collateral Agreement or any of the
Loan Documents, if the same remains uncured within the Cure Period.
9. Remedies. If any Event of Default shall have occurred and
be continuing, Secured Party may take any one or more of the
following actions:
9.1 Realization upon Collateral. Secured Party may exercise,
in addition to all other rights and remedies granted to it in this
Pledge Agreement and in any other of the Loan Documents, all rights
and remedies of a secured party under the UCC. Without limiting the
generality of the foregoing, Secured Party, without demand of
performance or other demand, presentment, protest, advertisement, or
notice of any kind (except any notice required by law referred to
below) to or upon Pledgor or any other person (all and each of which
demands, defenses, advertisements, and notices are hereby waived),
may in such circumstances forthwith collect, receive, appropriate,
and realize upon the Collateral, or any part thereof, and/or
forthwith sell, lease, assign, give an option or options to
purchase, or otherwise dispose of and deliver the Operator Demand
Note, the other Collateral or any part thereof (or contract to do
any of the foregoing), at a private or public sale, at any exchange,
broker's board or office of Pledgor or elsewhere upon such terms and
conditions as it may deem advisable and at such prices as it may
deem satisfactory, for cash or on credit or for future delivery
without assumption of any credit risk, and, without further notice
to Pledgor, shall be authorized to complete and record, or deliver
any endorsement of any Operator Demand Note or assignment of any
other portion of the Collateral. Secured Party shall have the right
upon any such public sale or sales, and, to the extent permitted by
law, upon any such private sale or sales, to purchase the whole or
any part of the Collateral so sold, free of any right or equity of
redemption in Pledgor, which right or equity is hereby waived and
released. Pledgor further agrees, at Secured Party's request, to
assemble any Collateral and make it available to Secured Party at
places which Secured Party shall reasonably select, whether at
Pledgor's premises or elsewhere. Secured Party shall apply the net
proceeds of any such collection, recovery, receipt, appropriation,
realization, or sale, after deducting all costs and expenses of
every kind incurred therein or incidental to the care or safekeeping
of any of the Collateral or in any way relating to the Collateral or
the rights of Secured Party hereunder, including, without
limitation, reasonable attorneys' fees and actual disbursements in
accordance with Section 10 hereof. To the extent permitted by
applicable law, Pledgor waives all claims, damages and demands it
may acquire against Secured Party arising out of the exercise by
Secured Party of any rights hereunder. If any notice of a proposed
sale or other disposition of Collateral shall be required by law,
Pledgor hereby agrees that such notice shall be deemed reasonable
and proper if given at least ten (10) days before such sale or other
disposition.
10. Application of Proceeds. If an Event of Default shall
have occurred and be continuing and Secured Party receives proceeds
with respect to the Collateral, through a foreclosure sale of the
Collateral or otherwise in connection with the enforcement of any
right or remedy hereunder, such proceeds shall be applied as
follows:
10.1 First, to the payment of costs and expenses of any such
sale, including reasonable compensation to Secured Party, its agents
and counsel, and of any judicial proceedings herein the same may be
made, and all costs and expenses incurred by Secured Party in
connection with its duties hereunder and under the other Loan
Documents, including, but not limited to, fees paid by Secured Party
to any agents, attorneys, and servicing companies retained by
Secured Party;
10.2 Second, to the payment of the whole amount then due,
owing, and unpaid upon the General Partner Demand Notes for
principal, together with any and all applicable interest and late
charges;
10.3 Third, to the payment of any other sums required to be
paid by Pledgor pursuant to this Pledge Agreement or any of the
other Loan Documents; and
10.4 Fourth, to the payment of any surplus then remaining
from such proceeds to Pledgor, or to its successors or assigns, or
as a court of competent jurisdiction may direct.
11. Miscellaneous.
11.1 Successors and Assigns. This Pledge Agreement shall be
binding upon and inure to the benefit of Secured Party and Pledgor
and the respective successors and assigns of Secured Party and
Pledgor, provided that no party comprising Pledgor may, without the
prior written consent of Secured Party, assign any rights, duties,
or obligations hereunder.
11.2 Waiver of Marshalling. All rights of marshalling of
assets of Pledgor, including any such right with respect to the
Collateral, are hereby waived by Pledgor.
11.3 Limitation by Law. All rights, remedies, and powers
provided in this Pledge Agreement may be exercised only to the
extent that the exercise thereof does not violate any applicable
provision of law, and all the provisions of this Pledge Agreement
are intended to be (a) subject to all applicable mandatory
provisions of law which may be controlling and (b) limited to the
extent necessary so that they will not render this Pledge Agreement
invalid, unenforceable, in whole or in part, or not entitled to be
recorded, registered, or filed under the provisions of any
applicable law.
11.4 Severability. The invalidity of any one or more
covenants, phrases, clauses, sentences, or paragraphs of this Pledge
Agreement shall not affect the remaining portions of this Pledge
Agreement, or any part thereof, and in case of any such invalidity,
this Pledge Agreement shall be construed as if such invalid
covenants, phrases, clauses, sentences, or paragraphs had not been
inserted.
11.5 Captions. The captions in this Pledge Agreement have
been inserted for convenience only and shall be given no substantive
meaning or significance whatsoever in construing the terms and
provisions of this Pledge Agreement.
11.6 Notices. Any notice which a party is required or may
desire to give the other party shall be in writing and shall be
delivered in the manner provided in Section 9.1 of the partnership
agreement of Secured Party.
11.7 No Waiver; Cumulative Remedies. No failure on the part
of Secured Party to exercise, and no delay in exercising, any right
hereunder shall operate as a waiver thereof; nor shall any single or
partial exercise of any such right preclude any other or further
exercise thereof or the exercise of any other right. The remedies
herein provided are cumulative and not exclusive of any remedies
provided by law.
11.8 Execution in Counterparts. This Pledge Agreement may be
executed in any number of counterparts, each of which when so
executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
11.9 Governing Law. THIS PLEDGE AGREEMENT IS INTENDED TO BE
PERFORMED IN THE STATE OF DELAWARE, AND THE LAWS OF SUCH STATE AND
OF THE UNITED STATES OF AMERICA SHALL GOVERN THE RIGHTS AND DUTIES
OF THE PARTIES HERETO AND THE VALIDITY, CONSTRUCTION, ENFORCEMENT,
AND INTERPRETATION OF THIS PLEDGE AGREEMENT.
11.10 Amendments, Etc. No amendment, modification or waiver
of any provision of this Pledge Agreement, nor consent to any
departure by Pledgor herefrom, shall be effective unless the same
shall be$in writing and signed by Secured Party, in which event such
waiver or consent shall be effective only in the specific instance
and for the specific purpose given.
IN WITNESS WHEREOF, this Agreement has been duly executed as
of the date first written above.
PLEDGOR:
RIDGEWOOD HOTELS, INC.,
a Georgia corporation
By:________________________
Name: ________________________
Title: _________________________
EXHIBIT "F"
CERTAIN IRR DEFICIENCY CALCULATIONS
This Exhibit describes the internal rate of return calculation
contemplated by Section 4.1 of the partnership agreement (this
"Partnership Agreement") to which this Exhibit is attached and of
which this Exhibit forms a part. Except as otherwise indicated in
this Exhibit, each capitalized term used herein shall have the
meaning given to the same elsewhere in the Partnership Agreement.
A. CERTAIN DEFINITIONS.
"End of Year N" means the date that is N years after Time O.
"Contributions" of a Partner means all contributions made
under Article III by such Partner to the Partnership on or
after Time O.
"Distributions" to a Partner means all distributions made to
such Partner under Article IV on or after Time O.
"IRR Rate" means the "15% IRR Rate" or the "25% IRR Rate", as
applicable.
"N" is an integer greater than zero.
"Time O" means June 7, 1995.
"Year N" means the Nth "Calculation Year" (as defined below)
after Time O.
"15% IRR Rate" means 15% per annum.
"25% IRR Rate" means 25% per annum.
B. ASSUMPTIONS. For the purpose of performing the future
value calculations described in this Exhibit:
(1) Periods. All calculations shall be based on consecutive
12-month periods (individually, a "Calculation Year"), the first of
which shall commence at Time O.
(2) Distributions. All Distributions will be considered to
have been made at the end of the Calculation Year in which they were
actually made. However, the amount of each Distribution of Net Sale
Proceeds or Net Financing Proceeds in a particular Calculation Year
will be increased to its future value as of the end of such
Calculation Year (from the date actually made) using the applicable
IRR Rate.
Example: [PLEASE SEE ATTACHED]
(3) Contributions: All amounts advanced by Limited Partner
or its partners shall be deemed to be Contributions as of the date
advanced, including the $100,000 deposit made on June 7, 1995,
whether or not reimbursed (it being understood that any such
reimbursement shall constitute a Distribution). All Contributions
after Time 0 will be considered to have been made at the end of the
year in which they were actually made; however, the amount of each
Contribution will be increased to its future value as of the end of
such Calculation Year (from the date actually made) using the
applicable IRR Rate.
Example: [PLEASE SEE ATTACHED]
C. CALCULATION. With respect to any particular IRR Rate, the
amount (the "IRR Deficiency") as of any particular date that Limited
Partner must receive in order to receive its internal rate of return
(using such IRR Rate) equals the amount by which (1) the future
value as of such date (but, as to any particular Contribution, not
less than one year after such Contribution is made) at such IRR
Rate, compounded quarterly, of all Contributions of Limited Partner,
exceeds (2) the future value (as of such date) at such IRR Rate,
compounded quarterly, of all Distributions to such Partner made on
or before such date. Accordingly, the "15% IRR Deficiency" is the
IRR Deficiency using the 15% IRR Rate and the "25% IRR Deficiency"
is the IRR Deficiency using the 25% IRR Rate.
Example: [PLEASE SEE ATTACHED]
EXHIBIT "G"
APPRAISAL PROCEDURE
The following provisions set forth the procedure for
determining fair market value referred to in the partnership
agreement (this "Agreement") to which this Exhibit is attached and
of which this Exhibit is a part. Except as otherwise indicated,
each capitalized term used herein shall have the meaning set forth
for the same elsewhere in this Agreement.
A. Definition. "Fair Market Value" means the price (as
determined pursuant to this Exhibit) at which the property (the
"Subject Property") to be appraised would be sold for cash by a
willing seller, not compelled to sell, to a willing buyer, not
compelled to buy, on a free and clear basis, unencumbered by any
financing (including, without limitation, any deeds of trust,
mortgages, ground leases [in connection with sale/leaseback
financing] or other security instruments securing any financing).
However, the determination of the Fair Market Value of the Subject
Property shall take into account (and be reduced by) the total
closing costs (including attorneys' fees, title insurance costs,
brokers' fees and recordation costs) that would customarily be paid
by the seller of properties of like kind and stature.
B. Agreement Procedure. First, the Partners shall attempt to
determine the Fair Market Value of the Subject Property by agreement
in accordance with this subsection B.
(1) Proposal. On (or within 15 days before or after) the
date (the "Determination Date") as of which the determination of
Fair Market Value is to be made, Electing Partner may give
Dissolution Partner written notice of its proposed Fair Market Value
of the Subject Property. If Dissolution Partner disagrees with such
proposed Fair Market Value, Dissolution Partner shall notify
Electing Partner in writing, within 10 business days after Electing
Partner's proposal is delivered, of its disagreement and its
counterproposal (and failure to do so within such 10-business day
period shall be deemed to constitute Dissolution Partner's agreement
with Electing Partner's proposal). Such 10-business day period is
herein called the "Proposal Period".
(2) Supplemental Discussion. If the parties fail to reach
actual (or deemed) agreement during the Proposal Period (or if the
proposal described above is not given), then the parties shall use
good faith efforts to reach agreement on the Fair Market Value of
the Subject Property on or before the "Outside Negotiation Date"
(which, as used herein, means the date that is 20 business days
after the Determination Date or, if later, 10 business days after
the Proposal Period, if any).
C. Appraisal Procedure. If agreement is not reached (or
deemed reached) on or before the Outside Negotiation Date, then the
Fair Market Value of the Subject Property shall be determined by an
appraisal made by a single appraiser or by a board of three
appraisers as hereinafter provided in this subsection C.
(1) Appointment of Appraisers.
(a) Appraiser Qualifications. Each appraiser selected under
this Exhibit must (i) be a reputable real estate appraiser, (ii) be
a member of the American Institute of Real Estate Appraisers or a
successor body hereinafter constituted exercising a similar
function, (iii) have experience in appraising property similar to
the Subject Property (in terms of location, size, improvements and
quality) and (iv) have no direct or indirect financial or other
business interests in any party to this Agreement or the Hotel
Property.
(b) Selection Process. During the 15-day period immediately
following the Outside Negotiation Date, the parties will endeavor to
jointly select, approve and appoint an appraiser to appraise the
Subject Property for the purposes of this Exhibit. If the parties
have not jointly appointed an appraiser by the date which is 15 days
after the Outside Negotiation Date, the appraisal of the Subject
Property for the purposes of this Exhibit will be conducted by a
board of three appraisers, one appointed by Electing Partner, one
appointed by Dissolution Partner and the third appointed by the
first two appraisers. In such event, the first two appraisers shall
be appointed by the parties by a date which is not later than 30
days after the Outside Negotiation Date, and the third appraiser
shall be appointed by the first two appraisers within 15 days after
the appointment of the first two appraisers. If the first two
appraisers are unable to agree on a third appraiser, such third
appraiser shall be appointed by the senior federal district court
judge, or such other federal district court judge as he may
designate, for the district in which the Subject Property is
located, acting in his non-judicial capacity. If such federal
district court judge refuses to act within 15 days after such
request, such third appraiser shall be appointed pursuant to the
rules of the American Arbitration Association.
(c) Costs. The costs and expenses of each of the first two
appraisers shall be paid by the party appointing such appraiser, and
the costs and expenses of the third appraiser (or the single
appraiser, if one appraiser, instead of three appraisers, is used)
shall be shared equally by the parties.
(2) Determination by Appraisers.
(a) Appraisal by One Appraiser. If the appraisal is to be
conducted by a single appraiser appointed jointly by the parties,
the appraiser appointed shall proceed to appraise the Subject
Property and notify the parties by written notice of the amount of
the Fair Market Value of the Subject Property, which notice shall be
accompanied by a copy of his appraisal report, not later than the
earlier to occur of the date which is 30 days after the appointment
of such appraiser and the date which is 45 days after the Outside
Negotiation Date, and such appraiser's determination of the Fair
Market Value of the Subject Property shall be deemed to be the Fair
Market Value of the Subject Property.
(b) Appraisal by Three Appraisers. If the appraisal is to be
conducted by a board of three appraisers, the appraisers shall
proceed to appraise the Subject Property and notify the parties by
written notice of the amount of their determinations of the Fair
Market Value of the Subject Property, which notices shall be
accompanied by copies of their appraisal reports and be given not
later than 30 days after the appointment of the third appraiser. If
the determinations of the Fair Market Value of the Subject Property
of any two or all three of the appraisers shall be identical in
amount, such amount shall be deemed to be the Fair Market Value of
the Subject Property, but if such determinations of all three
appraisers shall be different in amount, then the Fair Market Value
of the Subject Property shall be determined as follows:
(i) If neither the highest nor the lowest appraised value
differs from the middle appraised value by more than 10% of the
middle appraised value or if highest and lowest appraised values
each differ from the middle appraised value by the same amount, then
the Fair Market Value of the Subject Property shall be deemed to be
the average of the three appraised values; and
(ii) Otherwise, the Fair Market Value of the Subject Property
shall be deemed to be the average of the middle appraised value and
the appraised value closer in amount to the middle appraised value.
D. Conclusive Determination. The Fair Market Value of the
Subject Property determined in accordance with the provisions of
this Exhibit shall be binding and conclusive on the parties.