EXHIBIT 2.1
AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
OF
FAIRFIELD INN BY MARRIOTT LIMITED PARTNERSHIP
TABLE OF CONTENTS
Page
----
ARTICLE ONE DEFINED TERMS...........................................................................1
ARTICLE TWO FORMATION, NAME, PLACE OF BUSINESS, PURPOSE AND TERM....................................8
2.01. Formation................................................................................8
2.02. Name and Offices.........................................................................8
2.03. Purposes.................................................................................8
2.04. Term.....................................................................................8
2.05. Registered Agent for Service of Process..................................................8
2.06. Certificate of Limited Partnership.......................................................8
ARTICLE THREE PARTNERS AND CAPITAL..................................................................9
3.01. General Partner..........................................................................9
3.02. Organizational Limited Partner...........................................................9
3.03. Limited Partners.........................................................................9
3.04. Capital Contribution by General Partner..................................................9
3.05. Capital Contributions by Limited Partners; Withholding Taxes.............................10
3.06. Additional Issuances of Units and Capital Contributions; Fractional Units................11
3.07. Capital Accounts.........................................................................11
3.08. Liability of the Limited Partners........................................................11
3.09. Liability of the General Partner.........................................................11
3.10. Unit Certificates........................................................................11
3.11. Initial Working Capital Reserve..........................................................12
ARTICLE FOUR ALLOCATIONS OF PROFITS AND LOSSES: DISTRIBUTIONS OF CASH AND CERTAIN PROCEEDS..........12
4.01. Allocation of Net Profits................................................................12
4.02. Allocation of Net Losses.................................................................13
4.03. Allocations of Gain and Loss.............................................................13
4.04. Allocation Among Limited Partners of Net Profits, Gains, Net Losses, and Losses..........13
4.05. Distribution of Cash Available for Distribution..........................................14
4.06. Distribution of Refinancing Proceeds.....................................................14
4.07. Distribution of Sale Proceeds............................................................15
4.08. Distribution Among Limited Partners of Cash Available for Distribution, Refinancing
Proceeds, and Sale Proceeds............................................................15
4.09. Section 754 Adjustments..................................................................15
4.10. Special Allocations......................................................................16
4.11. Operating Rules..........................................................................18
ARTICLE FIVE RIGHTS, POWERS, AND DUTIES OF THE GENERAL PARTNER......................................19
5.01. Authority of the General Partner to Manage the Partnership...............................19
5.02. Restrictions on Authority of the General Partner.........................................23
5.03. Duties and Obligations of the General Partner............................................26
5.04. Compensation of General Partner..........................................................28
5.05. Other Business of Partners...............................................................29
5.06. Limitation on Liability of General Partner; Indemnification..............................29
5.07. Designation of Tax Matters Partner and Designated Person for Purposes of Investor List...30
5.08. Other Limitations........................................................................32
ARTICLE SIX WITHDRAWAL AND REMOVAL OF GENERAL PARTNER...............................................34
6.01. Limitation on Voluntary Withdrawal.......................................................34
6.02. Bankruptcy or Dissolution of the General Partner.........................................34
-i-
6.03. Liability of Withdrawn General Partner...................................................35
6.04. Removal of General Partner...............................................................35
6.05. Continuation and Reconstitution..........................................................36
ARTICLE SEVEN ASSIGNABILITY OF UNITS................................................................37
7.01. Restrictions on Assignments..............................................................37
7.02. Assignees and Substituted Limited Partners...............................................39
ARTICLE EIGHT DISSOLUTION AND LIQUIDATION OF THE PARTNERSHIP........................................40
8.01. Events Causing Dissolution...............................................................40
8.02. Liquidation..............................................................................41
8.03. Constructive Termination.................................................................42
ARTICLE NINE BOOKS AND RECORDS, ACCOUNTING, REPORTS, TAX ELECTIONS, ETC.............................42
9.01. Books and Records........................................................................42
9.02. Accounting and Fiscal Year...............................................................43
9.03. Bank Accounts and Investments............................................................43
9.04. Reports..................................................................................43
9.05. Tax Depreciation and Elections...........................................................45
9.06. Interim Closing of the Books.............................................................45
9.07. Information from Limited Partners........................................................45
ARTICLE TEN MEETING AND VOTING RIGHTS OF LIMITED PARTNERS...........................................45
10.01. Meetings................................................................................45
10.02. Special Voting Rights of Limited Partners...............................................46
ARTICLE ELEVEN MISCELLANEOUS PROVISIONS.............................................................48
11.01. Appointment of General Partner as Attorney-in-Fact......................................48
11.02. Amendments..............................................................................48
11.03. General Partner Representations and Warranties..........................................49
11.04. Binding Provisions......................................................................49
11.05. Applicable Law..........................................................................49
11.06. Counterparts............................................................................50
11.07. Separability of Provisions..............................................................50
11.08. Article and Section Titles..............................................................50
11.09. Short Form Filings......................................................................50
11.10. Submissions to State Securities Law Administrators......................................50
-ii-
Exhibit 2.1
FORM OF AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP OF
FAIRFIELD INN BY MARRIOTT LIMITED PARTNERSHIP
This Amended and Restated Agreement of Limited Partnership dated as of
July 31, 1990 and effective as of 12:01 a.m. on the date hereof is made and
entered into by and among Marriott FIBM One Corporation, a Delaware corporation,
as general partner (the "General Partner"), Christopher G. Townsend, as
organizational limited partner (the "Organizational Limited Partner"), and those
Persons who become limited partners of this limited partnership in accordance
with the provisions hereof and are identified as such in the books and records
of the Partnership (the "Limited Partner").
Fairfield Inn by Marriott Limited Partnership (the "Partnership") was
formed pursuant to a Certificate of Limited Partnership dated as of July 21,
1989 filed with the Secretary of State of the State of Delaware on August 23,
1989 and an Agreement of Limited Partnership dated as of July 21, 1989. The
General Partner (in its own capacity and as attorney-in-fact for the Limited
Partners) and Christopher G. Townsend, as organizational limited partner,
amended and restated the Agreement of Limited Partnership in its entirety as of
November 17, 1989 and April 17, 1990, and the parties desire to further amend
and restate such Amended and Restated Agreement of Limited Partnership in its
entirety as hereinafter set forth.
In consideration of the mutual agreements made herein, the parties
hereby agree to continue the Partnership as a limited partnership under the
Delaware Revised Uniform Limited Partnership Act (6 Del. C. (S)(S) 17-101, et
seq.), as amended from time to time (the "Act") as follows:
ARTICLE ONE
DEFINED TERMS
Section 1.01. The defined terms used in this Agreement shall, unless
the context otherwise requires, have the respective meanings specified in this
Section 1.01
"Accounting Period" means the four-week accounting periods having the
same beginning and ending dates as the General Partner's four-week accounting
periods, except that an Accounting Period may occasionally contain five weeks
when necessary to conform the accounting system to the calendar.
"Acquisition Expenses" means expenses related to the selection and
acquisition of properties, whether or not acquired, including, without
limitation, legal fees and expenses, travel and communications expenses, costs
of appraisals, costs of engineering and environmental reports with respect to
the Inns, non-refundable option payments on property not acquired, accounting
fees and expenses, Permanent Loan fees and expenses, title insurance, and
miscellaneous expenses related thereto.
"Acquisition Fee" means the total of all fees and commissions paid by
any party in connection with the purchase or development of property by the
Partnership, including, without limitation, any real estate commission,
selection fee, development fee (including the Development Fee), nonrecurring
management fee, or any fee of a similar nature, however designated; provided,
however, that no development fee paid to a Person that is not the General
Partner or an Affiliate in connection with the actual development of a project
after acquisition of the land by the Partnership shall be included.
"Adjusted Capital Account Deficit" means, with respect to any Partner,
the deficit balance, if any, in such Partner's Capital Account as of the end of
the relevant Fiscal Year, after giving effect to the following adjustments:
(i) Credit to such Capital Account any amounts that such Partner is
obligated to restore pursuant to any provision of this Agreement, is otherwise
treated as being obligated to restore under Section 1.704-1(b)(2)(ii)(c) of the
Treasury Regulations, or is deemed to be obligated to restore pursuant to the
penultimate sentences of sections 1.704-1T(b)(4)(iv)(f) and 1.704-
1T(b)(4)(iv)(h)(5) of the Treasury Regulations (determined after taking into
account any changes during such year in Minimum Gain); and
(ii) Debit to such Capital Account the items described in sections
1.704-1(b)(2)(ii)(d)(4), (5), and (6) of the Treasury Regulations.
"Affiliate" or "Affiliated Persons" means, when used with reference to
a specified Person, (i) any Person that directly or indirectly through one or
more intermediaries controls or is controlled by or is under common control with
the specified Person, (ii) any Person that is an officer or director of, general
partner in or trustee of, or serves in a similar capacity with respect to, the
specified Person or of which the specified Person is an officer, director,
general partner or trustee, or with respect to which the specified Person serves
in a similar capacity, (iii) any Person for which an officer or director of,
general partner in or trustee of, or individual serving in a similar capacity
with respect to, the specified Person serves in any such capacity, (iv) any
Person that, directly or indirectly, is the beneficial owner of 10% or more of
any class of equity securities (whether voting or nonvoting) of the specified
Person or of which the specified Person is directly or indirectly the owner of
10% or more of any class of equity securities (whether voting or nonvoting), and
(v) any relative or spouse of the specified Person who makes his or her home
with that of the specified Person.
"Agency Agreement" means the agency agreement, as amended to the date
hereof, among the Partnership, the General Partner, Marriott, and the Selling
Agent, providing for the offering of the Units by the Selling Agent on a best
efforts, all or none basis.
"Agreement" means this Amended and Restated Agreement of Limited
Partnership, as originally executed and as hereafter amended or modified from
time to time.
"Capital Account" or "Capital Accounts" means, with respect to a
Partner, the account maintained for such Partner which is determined and
maintained in the manner provided for in Section 3.07.
"Capital Contribution" or "Capital Contributions" means, with respect
to any Partner, the total amount of money contributed to the Partnership (prior
to the deduction of any selling commissions or expenses) by such Partner. For
purposes of determining Net Invested Capital and amounts described in Sections
4.06(ii) and 4.07A(ii) only, Capital Contributions shall be deemed to be equal
to $84,178,788 ($83,337,000 with respect to the Limited Partners and $841,788
with respect to the General Partner).
"Capital Priority Amount" means an amount equal to the sum of (i) the
Net Invested Capital of the Partners at the time of determination plus (ii) the
Partners 12% Preferred Distribution at the time of determination.
"Capital Receipts" means Sale Proceeds and/or Refinancing Proceeds.
"Cash Available for Distribution" means, with respect to any fiscal
period, the cash revenues of the Partnership from all sources (other than
Capital Receipts) during such fiscal period (including amounts received pursuant
to the Development Fee Adjustments and borrowings
-2-
pursuant to the parenthetical contained in Section 5.01C(ii)(c)) plus such
reserves as may be determined by the General Partner, in its reasonable
discretion, as no longer necessary to provide for the foreseeable needs of the
Partnership, less (i) all cash expenditures of the Partnership during such
fiscal period, including, without limitation, operating expenses, ground rent,
debt service, repayment of advances made by the General Partner (or Marriott
under the Limited Debt Service Guarantee) as and when such repayments are
required, any fees for management services, and administrative expenses but
excluding expenditures incurred by the Partnership in connection with a capital
transaction, and (ii) such reserves as may be determined by the General Partner,
in its reasonable discretion, to be necessary to provide for the foreseeable
needs of the Partnership, including, without limitation, for the maintenance,
repair, or restoration of the Inns.
"Certificate of Limited Partnership" means the Certificate of Limited
Partnership, and any and all amendments thereto, filed on behalf of the
Partnership with the Secretary of State of the State of Delaware as required
under the Act.
"Code" means the Internal Revenue Code of 1986, as amended (or any
corresponding provision or provisions of succeeding law).
"Consent" means either (a) the approval given by vote at a meeting
called and held in accordance with the provisions of Section 10.01, prior to the
taking of any action with respect to which such Consent is given, or (b) a prior
written approval required or permitted to be given pursuant to this Agreement or
the Act, as the context may require. Unless otherwise specified, "Consent of
the Limited Partners" shall mean Consent of Limited Partners holding, in their
capacity as Limited Partners and not as assignees, a majority of the outstanding
Units; provided, however, if the General Partner or any Affiliate of the General
Partner (other than an individual who acquires Units for his own account or a
trust or other similar entity that acquires Units for the direct benefit of an
individual) owns any Units, then in the case of each matter in which the General
Partner or an Affiliate thereof has an interest, such Units shall not be voted
on any such matter presented to the Limited Partners for a vote, except that in
connection with a decision to continue the business of the Partnership and to
appoint one or more general partners as provided in Section 6.05A, the General
Partner agrees that it will consent in writing to such action.
"Designated Person" means the General Partner.
"Development Fee" means the development fee payable to Marriott
pursuant to the Purchase Agreement in connection with Marriott's development of
the Inns, including concept development, site selection, feasibility studies,
design analysis, development and construction supervision and planning, market
research, and financing of the construction and development of the Inns.
"Development Fee Adjustments" means any reductions of the aggregate
Development Fee payable to Marriott with respect to the Inns pursuant to the
Purchase Agreement.
"Escrow Agreement" means the escrow deposit agreement, dated as of
November 17, 1989, among the Partnership, the General Partner, the Selling
Agent, and Bankers Trust Company, New York, New York, as escrow agent, providing
for the deposit of funds of subscribers in connection with the offering of
Units.
"FF&E" means (i) furniture, fixtures, furnishings, vehicles,
carpeting, and equipment and (ii) routine repairs and maintenance undertaken
subsequent to the opening date of an Inn or addition thereto, the cost of which
would not be expensed under generally accepted accounting principles.
-3-
"Fiscal Quarter" means, for the respective fiscal periods in any
Fiscal Year, (i) the period beginning on January 1, and having the same ending
date as the General Partner's 12-week fiscal first quarter, (ii) the same period
of time as the General Partners' second fiscal quarter, (iii) the same period of
time as the General Partner's third fiscal quarter, and (iv) the period from the
end of the General Partner's third fiscal quarter through December 31 in such
Fiscal Year.
"Fiscal Year" means the fiscal year of the Partnership as established
in Section 9.02.
"Front-end Fees" means fees and expenses paid by any party for any
services rendered during the Partnership's organizational or acquisition phase,
including Organization and Offering Expenses, Acquisition Fees, Acquisition
Expenses, and any other similar fees, however designated.
"Gain" or "Gains" means the gain or gains recognized by the
Partnership for Federal income tax purposes upon the sale or disposition of
Partnership property (plus any Section 267(d) Gain) (other than the routine sale
or disposition of used FF&E being replaced at an Inn), as reduced by the costs
of such sale or disposition.
"General Partner" means Marriott FIBM One Corporation, a Delaware
corporation and wholly owned subsidiary of Host, in its capacity as general
partner of the Partnership and its permitted successors or assigns and any
Person admitted as a substitute general partner pursuant to Section 6.01 or
10.02B.
"Ground Leases" means the leases between the Partnership, as tenant,
and Marriott and certain of its affiliates, as landlords, by which the
Partnership will lease the land on which the Inns described in Schedule II to
this Agreement are situated.
"Host" means Host International, Inc., a Delaware corporation and
wholly owned subsidiary of Marriott.
"Inns" means the Fairfield Inn by Marriott hotel properties as
described in Schedule I to this Agreement (or, in lieu thereof, the Fairfield
Inn by Marriott properties substituted therefor in certain circumstances in
accordance with the Purchase Agreement) and the land on which the Inns are
located (or, in the case of the Inns described in Schedule II to this Agreement,
the tenant's interest in the Ground Leases).
"Initial Limited Partners" means each Person purchasing Units in the
Initial Public Offering.
"Initial Public Offering" means the initial public offering of the
Units, as more fully described in the Prospectus and the registration statement
in which the Prospectus is included.
"Interest" means the entire interest of a Partner in the Partnership
at any particular time, including the right of such Partner to any and all
rights and benefits to which a Partner may be entitled as provided in this
Agreement, together with the obligations of such Partner to comply with all the
terms and provisions of this Agreement.
"Investment in Properties" means the amount of Capital Contributions
actually paid or allocated to the purchase, development, construction, or
improvement of properties acquired by the Partnership, including, without
limitation, the purchase of properties, working capital reserves allocable
thereto (except that working capital reserves in excess of 5% of Capital
Contributions shall not be included for this purpose), and other cash payments
such as interest and taxes but excluding Front-end Fees.
-4-
"Investor List" means that list, required by section 6112 of the Code,
identifying Persons to whom Interests in the Partnership were sold, such
Persons' addresses and taxpayer identification numbers, the dates on which the
Interests were acquired, the name and tax shelter registration number of the
Partnership, and such other information as may be required by Treasury
Regulations to be included therein.
"IRS" means the Internal Revenue Service.
"Limited Debt Service Guarantee" means the guarantee by Marriott in an
amount not exceeding $16.5 million of interest and principal due and unpaid by
the Partnership under the Loan Agreement.
"Limited Partner" means the Organizational Limited Partner, the
Initial Limited Partners, or any Substituted Limited Partner.
"Loan Agreement" means the credit agreement to be entered into between
the Partnership, as borrower, and Sumitomo Trust & Banking Co., Ltd., New York
Branch, as lender, to provide financing for the Inns.
"Loss or "Losses" means the loss or losses recognized by the
Partnership for Federal income tax purposes upon the sale or disposition of
Partnership property (other than the routine sale or disposition of used FF&E
being replaced at an Inn) taking into account costs of such sale or disposition.
"Management Agreement" means that certain management agreement, dated
as of November 17, 1989, between the Partnership and the Manager pursuant to
which the Manager will manage the Inns for the Partnership, as the same may be
amended or supplemented from time to time.
"Manager" means Fairfield FMC Corporation, a Delaware corporation and
wholly owned subsidiary of Marriott, as manager of the Inns.
"Marriott" means Marriott Corporation, a Delaware corporation.
"Minimum Gain" means the amount determined by computing, with respect
to each Nonrecourse Debt, the amount of Gain, if any, that would be realized by
the Partnership if it disposed of (in a taxable transaction) the Partnership
property subject to such liability in full satisfaction thereof (and for no
other consideration), and by then aggregating the amounts so computed. It is
the intent that Minimum Gain be determined in accordance with the provisions of
sections 1.704-1T(b)(4)(iv)(c) of the Treasury Regulations.
"Net Invested Capital" means Capital Contributions reduced by
cumulative distributions of Capital Receipts to the Partners pursuant to
Sections 4.06(ii) and 4.07A(ii). For purposes of determining the average daily
outstanding Net Invested Capital under this Agreement, the Capital Contributions
of the Partners shall be deemed to have been made on July 22, 1990.
"Net Profits" or Net Losses" means, for any period, the net profits or
net losses of the Partnership for Federal income tax purposes during such period
as determined under section 702 of the Code, including gain or loss on the
routine sale or disposition of used FF&E not in connection with the sale of an
Inn and excluding Gains and Losses and items specially allocated under Section
4.10.
"Nonrecourse Debt" means any Partnership liability that is considered
nonrecourse for purposes of section 1.1001-2 of the Treasury Regulations
(without regard to whether such liability
-5-
is a recourse liability under section 1.752-1T(d)(2) of the Treasury
Regulations) and any Partnership liability for which the creditor's right to
repayment is limited to one or more assets of the Partnership (within the
meaning of section 1.752-1T(d)(3)(ii)(B)(4)(ii) of the Treasury Regulations).
"Nonrecourse Liability" means any Nonrecourse Debt (or portion
thereof) for which no Partner bears (or is deemed to bear) the economic risk of
loss within the meaning of section 1.704-1T(b)(4)(iv)(k)(3) of the Treasury
Regulations.
"Notification" means a written notice, containing the information
required by this Agreement to be communicated to any Person, sent by registered,
certified, or regular mail to such Person; provided, however, that any
communication containing such information sent to such Person and actually
received by such Person shall constitute Notification for all purposes of this
Agreement.
"Organizational Limited Partner" means Christopher G. Townsend.
"Organization and Offering Expenses" means those expenses incurred by
the Partnership in connection with preparing the Partnership for registration
and subsequently offering and distributing the Units to the public, including,
without limitation, sales commission paid to broker-dealers in connection with
the distribution of the Units, the financial advisory fee payable pursuant to
the Agency Agreement, and all advertising expenses.
"Partner Nonrecourse Debt" means any Nonrecourse Debt (or portion
thereof) for which a Partner bears (or is deemed to bear) the economic risk of
loss within the meaning of section 1.704-1T(b)(4)(iv)(k)(1) of the Treasury
Regulations.
"Partners" means, collectively, the Limited Partners as constituted
from time to time and the General Partner.
"Partners' Preferred Distribution" means, with respect to each Fiscal
Year, an annual, non-cumulative amount equal to 9% of the average daily
outstanding Net Invested Capital during 1990 (for the period July 22, 1990
through December 31, 1990), 9.5% in 1991 and 1992, and 10% in each Fiscal Year
thereafter.
"Partners' 12% Preferred Distribution" means the excess of (a) the
product of (x) 12% per annum (applied using the simple interest method for the
period from July 22, 1990 through the date for which the determination is being
made on the basis of a 365/366-day year and the actual number of day elapsed)
multiplied by (y) the average daily outstanding Net Invested Capital over (b)
the sum of (i) all previous distributions made to the Partners pursuant to
Sections 4.05(A)(i), 4.05A(ii), 4.06(i), and 4.07A(i) and (ii) 101.01% of all
previous distributions made to the Limited Partners pursuant to Sections
4.05(A)(iii) and 4.05A(iv).
"Partnership" means the limited partnership formed under the Act and
continued by this Agreement by the parties hereto, as said Partnership may from
time to time be constituted.
"Partnership Debt" means any indebtedness for borrowed money incurred
by the Partnership.
"Permanent Loan" means the $164,850,000 term loan maturing on or after
December 31, 1996 that the lender has agreed to provide pursuant to the terms of
the Loan Agreement.
"Person" means any individual, partnership, corporation, trust or
other legal entity.
"Prime Rate" means the prime rate announced from time to time by The
First National Bank of Chicago, Chicago, Illinois.
-6-
"Prospectus" means the Partnership's prospectus included in the
registration statement on file with the United States Securities and Exchange
Commission pursuant to the Securities Act of 1933 for the registration of the
offering and sale of the Units in the Initial Public Offering at the time such
registration statement becomes effective, as supplemented.
"Purchase Agreement" means the purchase agreement, dated as of
November 17, 1989, between the Partnership, as purchaser, and Marriott and
certain of its affiliates, as sellers, providing for the purchase by the
Partnership of the Inns, and certain related materials and personal property,
including FF&E, as the same may be amended or supplemented to the date hereof.
"Refinancing Proceeds" means the net proceeds from any refinancing or
borrowing by the Partnership, the proceeds of which are applied to the repayment
of previously incurred Partnership obligations, or borrowed for distributions to
the Partners (other than borrowings pursuant to the parenthetical contained in
Section 5.01C(ii)(c)), including the proceeds of a sale and leaseback on which
no taxable gain is recognized for Federal income tax purposes, after deducting
(i) any expenses incurred in connection therewith, (ii) any amounts applied by
the General Partner toward the payment of any indebtedness, other obligation, or
expense of the Partnership or the creation of any reserves deemed necessary by
the General Partner in its reasonable discretion, and (iii) all amounts then
payable therefrom pursuant to the Management Agreement.
"Safe Harbors" has the meaning set forth in Section 5.03J.
"Sale Proceeds" means any net proceeds received by the Partnership
from (i) the exchange, condemnation, eminent domain taking, casualty, sale, or
other disposition of all or a portion of the Partnership's assets, or (ii) the
liquidation of the Partnership's property in connection with a dissolution of
the Partnership, after deducting (A) any expenses incurred in connection
therewith, (B) any amounts applied by the General Partner toward the payment of
any indebtedness, other obligation, or expense of the Partnership or the
creation of any reserves deemed necessary by the General Partner in its
reasonable discretion, (C) any amounts payable pursuant to exercise by the
Partnership of the Site Purchase Options (as defined in the Ground Leases) with
respect to one or more of the Inns subject to the Ground Leases, and (D) all
amounts payable therefrom pursuant to the Management Agreement. Sale Proceeds
shall not include the proceeds from the routine sale or disposition of used FF&E
not in connection with the sale of an Inn.
"Section 267(d) Gain" means gain realized by the Partnership but not
recognized solely by reason of section 267(d) of the Code.
"Selling Agent" means Merrill Lynch, Pierce, Fenner & Smith
Incorporated.
"Sponsor" means any Person directly or indirectly instrumental in
organizing, wholly or in part, the Partnership or any Person who will manage or
participate in the management of the Partnership, and any Affiliate of any such
Person, but does not mean (i) a Person whose only relation with the Partnership
is as that of an independent property manager, whose only compensation is as
such, or (ii) wholly independent third parties such as attorneys, accountants,
and underwriters, whose only compensation is for professional services rendered
in connection with the offering of Units.
"Substituted Limited Partner" means any Person admitted to the
Partnership as a Limited Partner pursuant to the provisions of Section 7.02 and
who is listed as such in the books and records of the Partnership.
"Tax Matters Partner" means the General Partner.
-7-
"Total Partnership Distributions" means the total amount of cash and
the fair market value of any property (net of any associated liabilities)
distributed to the Partners pursuant to Sections 4.05 through 4.08.
"Treasury Regulations" means the income tax regulations promulgated by
the Department of Treasury.
"Unit" means a unit of limited partnership interest represented by a
Capital Contribution of $1,000 (determined without reduction for purchase of a
Unit in circumstances where the Selling Agent foregoes all or a portion of the
fees and commissions payable to it) sold in the Initial Public Offering pursuant
to the Prospectus.
"Unit Certificate" means a non-negotiable certificate issued by the
Partnership, substantially in the form of Exhibit A hereto, evidencing the
ownership of one or more Units.
ARTICLE TWO
FORMATION, NAME, PLACE OF BUSINESS, PURPOSE AND TERM
Section 2.01. Formation. The parties have formed and do hereby
continue the Partnership formed as of August 23, 1989 pursuant to the provision
of the Act.
Section 2.02. Name and Offices. The name of the Partnership is and
shall be Fairfield Inn by Marriott Limited Partnership. The principal offices of
the Partnership shall be located at 10400 Fernwood Road, Bethesda, Maryland
20058 or at such other place or places as the General Partner may from time to
time determine, provided that the General Partner shall give the Limited
Partners written notice thereof not later than 60 days after the effective date
of such change of address and shall, if required, amend the Certificate of
Limited Partnership in accordance with the requirements of the Act. The address
of the registered office of the Partnership in the State of Delaware is at 229
South State Street, Dover, County of Kent, Delaware 19901.
Section 2.03. Purposes. The purposes of the Partnership are to invest
in, acquire, own, use, operate or manage the Inns, either as part of the
Fairfield Inn by Marriott system or otherwise, sell, lease, sublease, exchange,
or otherwise dispose of the Inns, and to engage in any other activities related
or incidental thereto.
Section 2.04. Term. The term of the Partnership shall continue in full
force and effect from the date of the filing of the original Certificate of
Limited Partnership until December 31, 2088, or until dissolution and
termination prior thereto pursuant to the provisions of Article Eight.
Section 2.05. Registered Agent for Service of Process. The name and
address of the registered agent for service of process on the Partnership in the
State of Delaware is The Prentice Hall Corporation System, Inc., 229 South State
Street, Dover, County of Kent, Delaware 19901.
Section 2.06. Certificate of Limited Partnership. On August 23, 1989,
the General Partner, in accordance with the Act, filed with the Secretary of
State of the State of Delaware a Certificate of Limited Partnership for the
Partnership. If the laws of any jurisdiction in which the Partnership transacts
business so require, the General Partner also shall file with the appropriate
office in that jurisdiction a copy of the Certificate of Limited Partnership and
any other documents necessary for the Partnership to qualify to transact
business in such jurisdiction and shall use its best efforts to file with the
appropriate office in that jurisdiction a copy of other documents necessary to
establish and maintain the Limited Partners' limited liability in such
jurisdiction. The Partners further agree and obligate themselves to execute,
acknowledge, and cause to be filed, in the place or
-8-
places and in the manner prescribed by law, any amendments to the Certificate of
Limited Partnership as may be required, either by the Act, by the laws of a
jurisdiction in which the partnership transacts business, or by this Agreement,
to reflect changes in the information contained therein or otherwise to comply
with the requirements of law for the continuation, preservation, and operation
of the Partnership as a limited partnership under the Act.
ARTICLE THREE
PARTNERS AND CAPITAL
Section 3.01. General Partner. The General Partner of the Partnership
is Marriott FIBM One Corporation, a Delaware corporation and wholly owned
subsidiary of Host, having its principal executive offices at 10400 Fernwood
Road, Bethesda, Maryland 20058, and any Person admitted as a substitute general
partner in accordance with Sections 6.01 or 10.02B.
Section 3.02. Organizational Limited Partner. The Organizational
Limited Partner who is hereby admitted as the organizational limited partner of
the Partnership is Christopher G. Townsend, 10 Paramus Court, North Potomac,
Maryland 20878. Upon admission to the Partnership of the Initial Limited
Partners, the Organizational Limited Partner will withdraw from the Partnership
and receive a return of his Capital Contribution.
Section 3.03. Limited Partners. The names and addresses of the
Limited Partners, the amount of their Capital Contributions, and the number of
Units held by them are set forth in the books and records of the Partnership. A
Person (other than a Person described in Section 7.01(I) or (J)) may be admitted
as an Initial Limited Partner, and shall become bound by this Agreement, if such
Person (or a representative authorized by such Person orally, in writing, or by
other action such as payment for an Interest) executes this Agreement or any
other writing evidencing the intent of such Person to become an Initial Limited
Partner. A Person (including a Person described above) shall be deemed to be
admitted as a Limited Partner when the General Partner has accepted such Person
as a Limited Partner of the Partnership, and the books and records reflect such
Person as admitted to the Partnership as a Limited Partner.
Section 3.04. Capital Contribution by General Partner.
A. The General Partner has made a Capital Contribution in the amount
of $1 in cash. Immediately prior to the contributions of the Initial Limited
Partners pursuant to Section 3.05B, the General Partner shall make an additional
Capital Contribution in the amount of $841,788 in cash.
B. In the event that the Partnership makes any tax payment on behalf
of or with respect to the General Partner, except to the extent (i) the
Partnership withholds such payment from a distribution which would otherwise be
made to the General Partner or (ii) the General Partner determines, in its
reasonable discretion, that such payment may be satisfied out of the available
funds of the partnership which would, but for such payment, be distributed to
the General Partner, the General Partner shall contribute to the Partnership an
amount equal to such tax payment within five days of the date such payment is
made.
Section 3.05. Capital Contributions by Limited Partners; Withholding
Taxes.
A. The Organizational Limited Partner heretofore has made a Capital
Contribution in the amount of $99 in cash, which Capital Contribution shall be
returned to the Organizational Limited Partner upon the admission of the Initial
Limited Partners, and the
-9-
Organizational Limited Partner, as such, thereafter shall have no further
rights, claims, or interest as a partner in and to the Partnership.
B. The Partnership intends to make the Initial Public Offering of
83,337 Units for cash and will admit as Initial Limited Partners the Persons
whose subscriptions for such Units are accepted by the General Partner (who may
refuse to accept the subscription of any Person or Persons for any reason
whatsoever). Each such Person shall become a Limited Partner in the Partnership
when (a) such Person has contributed to the capital of the Partnership $1,000 in
cash for each Unit (less any amounts attributable to selling commissions which
the Selling Agent has agreed to forego), each Initial Limited Partner being
required to make an initial purchase of at least five Units ($5,000) (less any
amounts attributable to selling commissions which the Selling Agent has agreed
to forego); (b) such Person or his authorized representative has executed and
filed with the Partnership the subscription documents specified in the
Prospectus, together with such other documents and instruments as the General
Partner may deem necessary or desirable to effect such admission; and (c) the
General Partner has accepted such Person's subscription for Units.
C. Each Limited Partner hereby authorizes the Partnership to withhold
from or pay on behalf of or with respect to such Limited Partner any amount of
Federal, state, local, or foreign taxes that the General Partner determines that
the Partnership is required to withhold or pay with respect to any amount
distributable or allocable to such Limited Partner pursuant to this Agreement,
including, without limitation, any taxes required to be withheld or paid by the
Partnership pursuant to sections 1441, 1442, 1445, or 1446 of the Code. Any
amount paid on behalf of or with respect to a Limited Partner shall constitute a
loan by the Partnership to such Limited Partner, which loan shall be repaid by
such Limited Partner within 45 days after notice from the General Partner that
such payment must be made unless (i) the Partnership withholds such payment from
a distribution which would otherwise be made to the Limited Partner or (ii) the
General Partner determines, in its reasonable discretion, that such payment may
be satisfied out of the available funds of the Partnership which would, but for
such payment, be distributed to the Limited Partner. Any amounts withheld
pursuant to the foregoing clauses (i) or (ii) shall be treated as having been
distributed to such Limited Partner. Each Limited Partner who is a nonresident
alien, foreign partnership, foreign corporation, or foreign trust or estate (a
"Foreign Investor") hereby unconditionally and irrevocably grants to the
Partnership a security interest in such Foreign Investor's Interest to secure
such Foreign Investor's obligation to pay to the Partnership any amounts
required to be paid pursuant to this Section 3.05C. In the event that a Foreign
Investor fails to pay any amounts owed to the Partnership pursuant to this
Section 3.05C when due, the General Partner shall make the payment to the
Partnership on behalf of such defaulting Foreign Investor, shall be deemed to
have loaned such amount to such defaulting Foreign Investor, and shall succeed
to all rights and remedies of the Partnership as against such defaulting Foreign
Investor. Any amounts payable by a Foreign Investor hereunder shall bear
interest at the Prime Rate plus four percentage points (but not higher than the
maximum lawful rate) from the date such amount is due (i.e., 45 days after
demand) until such amount is paid in full. Each Foreign Investor shall take
such actions as the Partnership or the General Partner shall request in order to
perfect or enforce the security interest created hereunder.
Section 3.06. Additional Issuances of Units and Capital
Contributions; Fractional Units.
A. No Units except those Units issued by the Partnership pursuant to
the Initial Public Offering shall be offered for sale or issued by the
Partnership without the written consent of the General partner and the Consent
of the Limited Partners.
B. No Partner shall be required or allowed to make any Capital
Contribution, except as specifically set forth in Sections 3.04, 3.05, 3.11, and
8.02E or in connection with an issuance of additional Units permitted under
Section 3.06A. All Capital Contributions provided for
-10-
in Section 3.05B shall be paid upon the admission of the Initial Limited
Partners to the Partnership and shall not be deferred for any reason.
C. No fractional Units shall be issued by the partnership.
Section 3.07. Capital Accounts.
A. The Capital Contribution of each Limited Partner and the General
Partner shall be credited to each such Partner's Capital Account. A Partner's
Capital Account shall also be credited with the amount of Net Profits or Gain
allocable to the Partner, and shall be debited with (x) such Partner's share of
Total Partnership Distributions and (y) the amount of Net Losses, Losses,
deductions or other items allocated to such Partner. Capital Accounts shall be
maintained and adjusted in accordance with the provisions of section 1.704-
1(b)(2)(iv) of the Treasury Regulations.
B. No Partner shall be entitled to receive any interest on his
outstanding Capital Account balance. Except upon the dissolution and
termination of the Partnership or as otherwise specifically provided in this
Agreement, no Partner shall have the right to demand or to receive the return of
all or any part of the Capital Account of Such Partner.
Section 3.08. Liability of the Limited Partners. Except as
otherwise described in the Act, no Limited Partner shall be liable for any
debts, liabilities, contracts, or any other obligations of the Partnership.
Except as otherwise described in the Act, a Limited Partner has no liability in
excess of his Capital Contribution and his share of the Partnership's assets and
undistributed profits, and shall not be required to lend any funds to the
Partnership or, after his Capital Contribution has been paid, to make any
further Capital Contributions to the Partnership or to pay to the Partnership,
any Partner, or any creditor of the Partnership any portion or all of any
negative balance of his Capital Account.
Section 3.09. Liability of the General Partner. Except as provided
in the Act, the General Partner has the liabilities of a partner in a
partnership without limited partners to Persons other than the Partnership and
the other Partners. Except as provided in the Act or herein, the General
Partner has the liabilities of a general partner in a partnership without
limited partners to the Partnership and to the other Partners. This Agreement
shall not be amended to limit such liability of the General Partner.
Section 3.10. Unit Certificates.
A. As soon as practicable after the issuance of the Units in
connection with the Initial Public Offering, the General Partner shall cause the
Partnership to issue one or more Unit Certificates in the name of each of the
Initial Limited Partners. Each such Unit Certificate shall be denominated in
terms of the number of Units evidenced by such Certificate. Upon the transfer
of a Unit permitted by Article Seven hereof, the General Partner shall cause the
Partnership to issue replacement Unit Certificates in accordance with such
procedures as the General Partner, in its sole and absolute discretion, may
establish. No Unit Certificate shall be issued representing a fraction of a
Unit.
B. The Partnership shall issue a new Unit Certificate in place of any
Unit Certificate previously issued if the owner of the Units represented by such
Unit Certificate, as reflected on the books and records of the Partnership:
(i) makes proof by affidavit, in form and substance satisfactory
to the General Partner, that such previously issued Unit Certificate
has been lost, destroyed, or stolen;
-11-
(ii) requests the issuance of a new Unit Certificate before the
Partnership has notice that such previously issued Unit Certificate
has been acquired by a purchaser for value in good faith and without
notice of an adverse claim;
(iii) if requested by the General Partner, delivers to the
Partnership a bond, in form and substance satisfactory to the General
Partner, with such surety or sureties and with fixed or open penalty,
as the General Partner may direct, to indemnify the Partnership
against any claim that may be made on account of the alleged loss,
destruction, or theft of such previously issued Unit Certificate; and
(iv) satisfies any other reasonable requirements imposed by the
General Partner.
When a previously issued Unit Certificate has been lost, destroyed, or
stolen, and the Partner fails to notify the Partnership within a reasonable time
after he has notice of such event, and a transfer of Units represented by the
Unit Certificate is registered on the books and records of the Partnership
before the Partnership receives such notification, the Partner shall be
precluded from making any claim against the Partnership with respect to such
transfer or for a new Unit Certificate.
Section 3.11. Initial Working Capital Reserve. In the event that
the initial working capital reserve of the Partnership following the admission
of the Initial Limited Partners, determined after the payment of all
Organization and Offering Expenses, Acquisition Fees, and Acquisition Expenses
(the "Initial Working Capital Reserve"), is less than $1,500,000, the General
Partner shall make a capital contribution in the amount of such difference to
the Partnership in cash. Contributions pursuant to this Section 3.11 shall be
reflected in the Capital Account of the General Partner.
ARTICLE FOUR
ALLOCATIONS OF PROFITS AND LOSSES:
DISTRIBUTIONS OF CASH AND CERTAIN PROCEEDS
Section 4.01. Allocation of Net Profits. Subject to the provisions
of Section 4.10, Net Profits with respect to each Fiscal Year will be allocated
among the Partners, pro rata, in proportion to the distributions of Cash
Available for Distribution to the Partners with respect to such Fiscal Year
(including distributions of Cash Available for Distribution made in a subsequent
Fiscal Year with respect to the immediately preceding Fiscal Year for which Net
Profits are being allocated); provided, however, that if Net Profits with
respect to a Fiscal Year exceed distributions of Cash Available for Distribution
with respect to such Fiscal Year, Net Profits with respect to such Fiscal Year
shall be allocated in accordance with the ratio in which Cash Available for
Distribution would have been distributed had an amount of cash equal to such Net
Profits been available for distribution.
Section 4.02. Allocation of Net Losses. Subject to the provisions
of Section 4.10, Net Losses for each Fiscal Year shall be allocated 1% to the
General Partner and 99% to the Limited Partners.
Section 4.03. Allocations of Gain and Loss.
A. Subject to the provisions of Section 4.10, Gain recognized by the
Partnership shall be allocated (after giving effect to the allocations referred
to in Sections 4.01 and 4.02 and all distributions other than distributions
pursuant to Section 4.07B) with respect to any Fiscal Year in the following
order of priority:
-12-
(i) first, to all Partners whose Capital Accounts have
negative balances, in the ratio of such negative balances until such
negative balances are brought to zero;
(ii) second, to the Limited Partners in the amount necessary to
bring the aggregate of their Capital Account balances to an amount
equal to 99% of the Capital Priority Amount and to the General Partner
in the amount necessary to bring its Capital Account balance to an
amount equal to 1% of the Capital Priority Amount; provided, however,
that if there is insufficient Gain to bring such balances to such
levels, then (a) Gain first shall be allocated so as to cause the
ratio of the aggregate balance in the Capital Account of the Limited
Partners to the General Partner's Capital Account balance to be 99 to
1 and (b) any remaining Gain allocable pursuant to this subsection
(ii) shall be allocated 99% to the Limited Partners and 1% to the
General Partner; and
(iii) thereafter, any remaining Gain shall be allocated among
the Partners so that, to the extent possible, the ratio of (A) the
aggregate balance in the Capital Accounts of the Limited Partners in
excess of 99% of the Capital Priority Amount to (B) the balance in the
General Partner's Capital Account in excess of 1% of the Capital
Priority Amount, is 80 to 20.
B. Subject to the provisions of Section 4.10, Losses recognized by
the Partnership shall be allocated (after giving effect to the allocations
referred to in Sections 4.01 and 4.02 and all distributions other than
distributions pursuant to Section 4.07B) with respect to any Fiscal Year in the
following order of priority;
(i) first, Losses shall be allocated to the Partners with
positive Capital Account balances until all positive balances in the
Partners' Capital Accounts shall have been eliminated, with such
allocation being made in proportion to the outstanding positive
Capital Account balances; and
(ii) second, all remaining Losses shall be allocated 100% to
the General Partner.
Section 4.04. Allocation Among Limited Partners of Net Profits,
Gains, Net Losses, and Losses. Subject to the provisions of Section 4.10, any
Net Profits, Gains, Net Losses, or Losses for any Fiscal Year allocable to the
Limited Partners shall be allocated among the Limited Partners pro rata in
accordance with the number of Units owned by each as of the end of such Fiscal
Year; provided that if any Unit is assigned during the Fiscal Year in accordance
with this Agreement, (a) the Net Profits or Net Losses that are so allocable to
such Unit shall be allocated between the assignor and assignee of such Unit
according to the number of Accounting Periods in such Fiscal Year each owned
such Unit, and (b) any Gains or Losses allocable to the Limited Partners shall
be allocated among the Limited Partners who held Units on the last day of the
Fiscal Quarter in which the sale or disposition giving rise to such Gains or
Losses occurred, pro rata in accordance with the number of Units owned by each
such Limited Partner. If any Unit is purported to be assigned by a Limited
Partner other than on the first day of a Fiscal Quarter (in contravention of
this Agreement), then the Partnership shall not recognize such assignment for
the purposes of allocating Net Profits, Gains, Net Losses, or Losses or for any
other purpose unless the assignment is permitted by Section 7.01 hereof and then
only as of the first day of the next Fiscal Quarter commencing after the
expiration of 15 days from the receipt by the Partnership of an application for
such assignment.
Section 4.05. Distribution of Cash Available for Distribution.
A. Cash Available for Distribution with respect to each Fiscal Year
shall be distributed quarterly as follows:
-13-
(i) first, until the Partners shall have received with respect
to such Fiscal Year an amount equal to the Partners' Preferred
Distribution, 1% to the General Partner and 99% to the Limited
Partners;
(ii) second, through and including the end of the Accounting
Period during which the Partners have received cumulative
distributions of Capital Receipts pursuant to Sections 4.06(ii) and
4.07A(ii) equal to $42,089,394, 1% to the General Partner and 99% to
the Limited Partners;
(iii) third, through and including the end of the Accounting
Period during which the Partners have received cumulative
distributions of Capital Receipts pursuant to Sections 4.06(ii) and
4.07A(ii) equal to $84,178,788, 10% to the General Partner and 90% to
the Limited Partners; and
(iv) thereafter, 20% to the General Partner and 80% to the
Limited Partners.
B. Cash Available for Distribution shall be distributed to the
Partners within 45 days after the end of each Fiscal Quarter. For purposes of
Section 4.05A(i) above, distributions made in a subsequent Fiscal Year with
respect to the last Fiscal Quarter of the immediately prior Fiscal Year shall be
considered made with respect to such prior Fiscal Year.
C. The partners' Preferred Distribution for 1990 will be prorated,
based upon the number of days in each Fiscal Quarter (assuming for purposes
hereof that the third Fiscal Quarter commenced on July 22, 1990).
Section 4.06. Distribution of Refinancing Proceeds. Refinancing
Proceeds from a refinancing or borrowing shall, unless the General Partner, in
its reasonable discretion, shall determine to retain any such amounts in the
Partnership in accordance with Section 5.08, be distributed, as soon as is
reasonably practicable after the transaction occurs, as follows:
(i) first, until the Partners shall have received
distributions pursuant to this Section 4.06(i) of Refinancing Proceeds
from such refinancing or borrowing equal to the then outstanding
Partners' 12% Preferred Distribution, 1% to the General Partner and
99% to the Limited Partners;
(ii) second, until the Partners shall have received cumulative
distributions of Capital Receipts pursuant to this Section 4.06(ii)
and Section 4.07A(ii) equal to the Partners' Capital Contributions, 1%
to the General Partner and 99% to the Limited Partners; and
(iii) thereafter, 20% to the General Partner and 80% to the
Limited Partners.
Section 4.07. Distribution of Sale Proceeds.
A. Sale Proceeds from the sale or other disposition of less than
substantially all of the assets of the Partnership shall, unless the General
Partner, in its reasonable discretion, shall determine to retain any such
amounts in the Partnership in accordance with Section 5.08, be distributed, as
soon as is reasonably practicable after the transaction occurs, as follows:
(i) first, until the Partners shall have received
distributions pursuant to this Section 4.07A(i) of Sale Proceeds from
such sale or other disposition equal to the then outstanding Partners'
12% Preferred Distribution, 1% to the General Partner and 99% to the
Limited Partners;
-14-
(ii) second, until the Partners shall have received cumulative
distributions of Capital Receipts pursuant to this Section 4.07A(ii)
and Section 4.06(ii) equal to the Partners' Capital Contributions, 1%
to the General Partner and 99% to the Limited Partners; and
(iii) thereafter, 20% to the General Partner and 80% to the
Limited Partners.
B. As provided in Section 8.02, Sale Proceeds from the sale of all or
substantially all of the assets of the Partnership, or from a related series of
Inn sales that, taken together, result in the sale of substantially all of the
assets of the Partnership, will be distributed to the Partners in accordance
with their Capital Account balances, as adjusted to take into account Gain or
Loss resulting from such sale or sales.
Section 4.08. Distribution Among Limited Partners of Cash Available
for Distribution, Refinancing Proceeds, and Sale Proceeds. Cash Available for
Distribution distributable with respect to any Fiscal Quarter to the Limited
Partners pursuant to Section 4.05 shall be distributed to the Limited Partners
pro rata in accordance with the number of Units owned by each as of the end of
such Fiscal Quarter. Capital Receipts distributable to the Limited Partners
pursuant to Section 4.06 or Section 4.07A shall be distributed to the Limited
Partners pro rata in accordance with the number of Units owned by each such
Limited Partner on the last day of the Fiscal Quarter in which the transaction
giving rise to such proceeds was completed. If a Unit is purported to be
assigned by a Limited Partner other than on the first day of a Fiscal Quarter
(in contravention of this Agreement), then the Partnership shall not recognize
such assignment for the purpose of distributing amounts pursuant to Sections
4.05, 4.06, and 4.07 or for any other purpose unless the assignment is permitted
by Section 7.01 hereof, and then only as of the first day of the next Fiscal
Quarter commencing after the expiration of 15 days from the receipt by the
Partnership of an application for such assignment.
Section 4.09. Section 754 Adjustments. For income tax purposes (but
not for purposes of adjusting the Capital Accounts of the Partnership, except as
otherwise provided in section 1.704-1(b)(2)(iv) of the Treasury Regulations),
appropriate adjustments shall be made in the information furnished to affected
Limited Partners with respect to allocations under this Article Four in order to
reflect adjustments in the basis of Partnership property permitted pursuant to
any election under section 754 of the Code if the General Partner, in its sole
discretion, makes such election. If such an election is made, the Partnership
shall make the basis adjustments and calculate depreciation deductions in
accordance with such adjustments for those transferee Limited Partners who
advise the Partnership of this obligation and provide sufficient information to
enable the Partnership to determine when, and at what price, such transferee
Limited Partners acquired Units. In the case of a transferee Limited Partner who
does not advise the Partnership of such information, the Partnership shall
attempt to supply such Limited Partner with reasonably available information
that will permit such Limited Partner to make the required basis adjustment
calculation.
Section 4.10. Special Allocations. The following provisions shall
apply notwithstanding the provisions of Sections 4.01, 4.02, 4.03, and 4.04. In
the event that there is a conflict between any of the following provisions, the
earlier listed provision shall govern.
A. If there is a net decrease in the Minimum Gain attributable to
Nonrecourse Liabilities during any Fiscal Year, each Partner shall be specially
allocated items of Partnership income and gain for such year (and, if necessary,
for subsequent years) in proportion to, and to the extent of, an amount equal to
the greater of the following:
(i) the portion of such Partner's share of the net decrease in
such Minimum Gain during such year (as such share is determined
pursuant to section 1.704-1T(b)(4)(iv)(f) of the Treasury Regulations)
that is allocable to the disposition of
-15-
Partnership property subject to one or more Nonrecourse Liabilities
(as such allocable portion is determined pursuant to section 1.704-
1T(b)(4)(iv)(e)(2) of the Treasury Regulations); or
(ii) such Partner's Adjusted Capital Account Deficit at the end
of such year (determined, for this purpose, before any allocation for
such year of any items of income, gain, loss, or deduction or items
described in section 705(a)(2)(B) of the Code).
It is intended that items to be so allocated shall be determined and
the allocations made in accordance with the minimum gain chargeback requirement
of section 1.704-1T(b)(4)(iv)(e) of the Treasury Regulations, and this Section
4.10A shall be interpreted consistently therewith.
B. If there is a net decrease in the Minimum Gain attributable to
Partner Nonrecourse Debts during any Fiscal Year, each Partner who has a share
of the Minimum Gain attributable to such Partner Nonrecourse Debts shall be
specially allocated items of Partnership income and gain for such year (and, if
necessary, for subsequent years) to the extent of an amount equal to the greater
of the following:
(i) the portion of such Partner's share of the net decrease in
such Minimum Gain during such year that is allocable to the
disposition of Partnership property subject to one or more Partner
Nonrecourse Debts (as such allocable portion is determined pursuant to
section 1.704-1T(b)(4)(iv)(h) of the Treasury Regulations); or
(ii) such Partner's Adjusted Capital Account Deficit at the end
of such year (determined, for this purpose, before any allocation for
such year of any items of income, gain, loss or deduction or items
described in section 705(a)(2)(B) of the Code).
It is intended that items to be so allocated shall be determined and
the allocations made in accordance with the minimum gain chargeback requirement
of section 1.704-1T(b)(4)(iv)(h) of the Treasury Regulations, and this Section
4.10B shall be interpreted consistently therewith.
C. In the event a Partner unexpectedly receives in any taxable year
any adjustments, allocations, or distributions described in section 1.704-
1(b)(2)(ii)(d)(4), (5), or (6) of the Treasury Regulations that cause or
increase an Adjusted Capital Account Deficit of such Partner, items of
Partnership income and gain shall be specially allocated to such Partner in such
taxable year (and, if necessary, in subsequent taxable years) in an amount and
manner sufficient to eliminate, to the extent required by the Treasury
Regulations, the Adjusted Capital Account Deficit of such Partner as quickly as
possible. It is intended that items to be so allocated shall be determined and
the allocations made in accordance with the "qualified income offset"
requirement of section 1.704-1(b)(ii)(d) and this Section 4.10C shall be
interpreted consistently therewith.
D. No Net Losses, Losses, or Partnership deductions for any Fiscal
Year shall be allocated to any Limited partner to the extent such allocation
would cause or increase an Adjusted Capital Account Deficit with respect to such
Partner, and such Net Losses, Losses, or Partnership deductions shall be instead
be allocated to the General Partner.
E. If in any Fiscal Year there is a net increase during such year in
the amount of Minimum Gain attributable to a Partner Nonrecourse Debt, any
Partner bearing the economic risk of loss with respect to such debt (within the
meaning of section 1.752-1T(d)(3) of the Treasury Regulations) shall be
specially allocated items of Partnership loss or deduction in an amount equal to
the excess of (i) such Partner's share of the amount of such net increase, over
(ii) the aggregate amount of any distributions during such year to such Partner
of the proceeds of such debt that are allocable to such increase in Minimum
Gain. It is intended that items to be so allocated shall be
-16-
determined and the allocations made in accordance with the required allocations
of "partner nonrecourse deductions" pursuant to section 1.704-1T(b)(4)(iv)(h) of
the Treasury Regulations and this Section 4.10E shall be interpreted
consistently therewith.
F. Selling commissions and similar fees that are "syndication
expenses," as described in the Treasury Regulations under section 709 of the
Code, paid or incurred by the Partnership in any Fiscal Quarter in respect of
any Unit shall be specially allocated to and charged to the Capital Account of
the Limited Partner owning such Unit during such Fiscal Quarter. Any other such
syndication expenses shall be allocated and charged to the Capital Accounts of
the Partners in the following manner: first, to the General Partner to the
extent of Capital Contributions made by it pursuant to Section 3.11A and
thereafter, 99% to the Limited Partners and 1% to the General Partner.
G. "Recapture income," if any, realized by the Partnership pursuant
to section 1245 or section 1250 of the Code allocated to the Partners under
Sections 4.01, 4.02, or 4.03 shall be allocated, to the extent possible, to the
Partners to whom (or to whose predecessors in interest) the prior corresponding
depreciation deductions were allocated, such allocations to be made pro rata to
the Partners in accordance with the manner in which such depreciation deductions
were allocated.
H. In the event that any fees, interest, or other amounts paid to a
Partner or an Affiliate of a Partner pursuant to this Agreement, the Ground
Leases, the Management Agreement, or any other agreement between the Partnership
and such Partner or Affiliate providing for the payment of such amounts, and
deducted by the Partnership, whether in reliance upon section 162, 163, 707(a),
or 707(c) of the Code or otherwise, are disallowed as deductions to the
Partnership on its federal income tax return for the Fiscal Year in or with
respect to which such amounts are paid and are treated instead as Partnership
distributions, then:
(i) the Net Profits or Net Losses, as the case may be, for
the Fiscal Year in or with respect to which such fees, interest, or
other amounts were paid shall be increased or decreased, as the case
may be, by the amount of such fees, interest, or other amounts that
are disallowed and treated as Partnership distributions; and
(ii) there shall be allocated to the Partner who received (or
whose Affiliate received) such payments an amount of gross income for
the Fiscal Year in or with respect to which such fees, interest or
other amounts were paid equal to the amount of such fees, interest or
other amounts that are so disallowed and treated as Partnership
distributions.
I. If the Partnership acquires property by purchase or exchange from
a transferor who, on the transaction, sustained a loss not allowable in whole or
in part as a deduction by reason of section 267(a)(1) of the Code, and the
Partnership subsequently realizes an amount of gain on the sale or other
disposition of the property which is not recognized by reason of section 267(d),
then
(i) the amount of Gain allocated under Section 4.03A to the
Partner or Partners related to such transfer shall be deemed to
consist of the Section 267(d) Gain to the extent of the lesser of the
amount of the Section 267(d) Gain or the amount of Gain allocated to
such Partner(s) pursuant to Section 4.03A; and
(ii) if the amount of the Section 267(d) Gain exceeds the
amount of Gain allocated to the Partner or Partners related to such
transferor pursuant to Section 4.03A, the amounts of Gain allocated to
the other Partners under Section 4.03A shall be deemed to consist pro
rata of such excess Section 267(d) Gain.
-17-
J. If the closing with respect to the Initial Public Offering occurs
in 1989, any Net Losses and Net Profits for the Fiscal Year of the Partnership
ending on December 31, 1989 will be allocated to the General Partner.
Section 4.11. Operating Rules.
A. Solely for purposes of determining a Partner's proportionate share
of the "excess nonrecourse liabilities" of the Partnership within the meaning of
Section 1.752-1T(e)(3)(ii) of the Treasury Regulations, the General Partner's
interest in Partnership profits shall equal 1% and the Limited Partners'
aggregate interest in Partnership profits shall equal 99%. Each Limited
Partner's share of Partnership profits shall be the product of 99% times a
fraction, the numerator of which is the total number of Units owned by such
Limited Partner as of the time as of which the determination of such Limited
Partner's share is being made and the denominator of which is the total number
of Units as of such time.
B. Except as otherwise specifically provided in this Agreement, the
distributive share of a Partner of each specific deduction and item of income,
loss, and credit of the Partnership for Federal income tax purposes shall be the
same as such Partner's share of Net Profits, Gains, Net Losses, or Losses, as
the case may be, for such Fiscal Year.
C. For purposes of this Agreement, any amount of taxes required to be
withheld by the Partnership with respect to any Partner or required to be paid
by the Partnership in respect of any Partner's tax obligation shall be deemed to
be a distribution or payment to such Partner and shall reduce the amount
otherwise distributable to such Partner pursuant to this Agreement.
D. In the event of a sale or other disposition of less than
substantially all of the assets of the Partnership, (i) for purposes of
determining the balances in the Capital Accounts of the Partners in order to
allocate Gain or Loss recognized from such sale or disposition pursuant to
Section 4.03, each Partner's Capital Account balance shall be deemed to include
any amount that such Partner is deemed to be obligated to restore pursuant to
the penultimate sentences of sections 1.704-1T(b)(4)(iv)(f) and 1.704-
1T(b)(4)(iv)(h)(5) of the Treasury Regulations (determined after taking into
account any changes during such year in Minimum Gain, including changes in
Minimum Gain resulting from such sale or other disposition); and (ii) for
purposes of determining the Capital Accounts order to allocate loss recognized
from such sale or disposition pursuant to Section 4.03B, each Partner's Capital
Account shall be reduced by the items described in sections 1.704-
1(b)(2)(ii)(d)(4), (5), and (6).
ARTICLE FIVE
RIGHTS, POWERS, AND DUTIES OF THE GENERAL PARTNER
Section 5.01. Authority of the General Partner to Manage the
Partnership.
A. The General Partner shall have the exclusive right and power to
conduct the business and affairs of the Partnership and to do all things
necessary to carry on the business of the Partnership in accordance with the
provisions of this Agreement and applicable law, and is hereby authorized to
take any action of any kind and to do anything and everything it deems necessary
or appropriate in accordance with the provisions of this Agreement and
applicable law. Except as expressly provided herein, the authority to conduct
the business of the Partnership shall be exercised only by the General Partner.
Subject to Section 5.01E, the General Partner may appoint, contract, or
otherwise deal with any Person, including employees of its Affiliates, to
perform any acts or services for the Partnership necessary or appropriate for
the conduct of the business and affairs of the Partnership.
-18-
B. No Limited Partner shall participate in or have any control
whatsoever over the Partnership's business or have any authority or right to act
for or bind the Partnership; provided, however, that any action of the Limited
Partners which for purposes of the Act would not constitute such participation
or control shall not be deemed such for purposes of this Agreement. The Limited
Partners hereby unanimously Consent to the exercise by the General Partner of
the powers conferred on it by this Agreement, subject to the restrictions and
limitations set forth in this Agreement or this Act.
C. Except to the extent otherwise provided herein, the General
Partner is hereby authorized, without the Consent of the Limited Partners, to:
(i) execute any and all agreements (including the Purchase
Agreement, the Ground Leases, the Management Agreement, the Loan
Agreement, and the Limited Debt Service Guarantee, which agreements
shall be deemed to satisfy all requirements of this Agreement),
contracts, documents, certifications and instruments necessary or
convenient in connection with the acquisition, development, financing,
management, maintenance, operation, sale, or other disposition of the
Partnership's properties and assets except as otherwise limited by
this Agreement;
(ii) borrow money from itself or others (including Affiliates of
any general partner of the Partnership) and issue evidences of
indebtedness necessary, convenient, or incidental to the
accomplishment of the purposes of the Partnership and to secure the
same by mortgage, pledge, or other lien on the assets of the
Partnership, such borrowing and security to be only with respect to
the following: (a) any amounts advanced by the General Partner or an
Affiliate of the General Partner (including, without limitation,
advances by Marriott under the Limited Debt Service Guarantee), which
amounts may or may not be secured, or any other lender to enable the
Partnership to satisfy its obligations arising in the normal course of
its business, to make payments of principal, interest, premium, or
penalty on any debt of the Partnership or to make capital repairs,
improvements, and expansions, (b) the debt under the Loan Agreement,
(c) amounts incurred for the purpose of making distributions to the
Partners (which, in the case of a borrowing to make a distribution to
the Partners with respect to any unpaid Partners' Preferred
Distribution, shall be borrowed from the General Partner, shall not
exceed an amount equal to the Cash Available for Distribution (other
than prior borrowings pursuant to this parenthetical included therein)
with respect to the 13 Accounting Periods ending on the last day of
the Fiscal Quarter for which such distribution is to be made, and
shall be based on funds of the Partnership reasonably expected to be
received within the following 12 months), (d) any indebtedness the
incurrence of which has been specifically Consented to by the Limited
Partners under Section 5.02B, (e) any indebtedness incurred to
refinance (and thereafter further refinance as often as shall be
necessary) the unamortized portion of any of the foregoing (including
the costs of such refinancing) from time to time (including, without
limitation, indebtedness from third parties to finance the payment of
amounts payable under the Management Agreement), or (f) any
indebtedness that the General Partner otherwise has determined, in
accordance with its fiduciary duties as a general partner, is in the
best interests of the Partnership and the Limited Partners; provided,
however, that in connection with the borrowing of money on a
nonrecourse basis, no lender shall be granted or acquire, at any time
as a result of making such a loan, any direct or indirect interest in
the profits, capital, or property of the Partnership other than as a
secured creditor;
(iii) prepay in whole or in part, refinance (to the extent
permitted by clause (ii) above), fix the interest rate on, recast,
modify or extend any mortgage debt
-19-
affecting or encumbering any of the Partnership's property and in
connection therewith to execute any extensions, consolidations,
modifications, or renewals of mortgages on any assets of the
Partnership;
(iv) deal with, or otherwise engage in business with, or provide
services to and receive compensation therefor from, any Person who has
provided or may in the future provide any services, lend money, or
sell property to or purchase property from the General Partner or any
Affiliate of the General Partner. No such dealing, engaging in
business, or providing of services may involve any direct or indirect
payment by the Partnership of any rebate or any reciprocal arrangement
for the purpose of circumventing any restriction set forth herein upon
dealings with the General Partner or any Affiliate of the General
Partner;
(v) engage in any kind of activity and perform and carry out
contracts of any kind necessary to, or in connection with, or
incidental to the accomplishment of, the purposes of the Partnership,
as may be lawfully carried on or performed by a limited partnership
under the laws of the State of Delaware and in each state where the
Partnership has been qualified to do business; and
(vi) take such actions (including, but not limited to, amending
this Agreement) as the General Partner determines are advisable or
necessary, based upon advice of counsel to the Partnership, and will
not result in any material adverse effect on the economic position of
holders of a majority of the Units, (a) to preserve the tax status of
the Partnership as a partnership for Federal income tax purposes, (b)
to conform this Agreement to (i) the Act for the purpose of preserving
the tax status of the Partnership as a partnership for Federal income
tax purposes, or (ii) provisions of the Code or the Treasury
Regulations relating to taxation of partners and partnerships,
including, without limitation, any changes thereto, or (c) in the
event that any provision of the Code or the Treasury Regulations
causes the terms of this Agreement to differ to the detriment of the
Limited Partners from the terms as contemplated by the Partners (as
reflected in the Prospectus), to modify this Agreement in a manner
designed to ameliorate such difference.
D. Any Person dealing with the Partnership or the General Partner may
rely upon a certificate signed by the Secretary or any Assistant Secretary of
the General Partner, thereunto duly authorized, as to:
(i) the identity of the General Partner or any Limited Partner;
(ii) the existence or non-existence of any fact or facts which
constitute a condition precedent to the acts by the General Partner or
in any other manner germane to the affairs of the Partnership;
(iii) the Persons who are authorized to execute and deliver any
instrument or document of the Partnership; and
(iv) any act or failure to act by the Partnership or as to any
other matter whatsoever involving the Partnership or any Partner.
E. Except as otherwise specifically set forth herein (including,
without limitation Section 5.04) or in the Prospectus and except for (a) legal
and financial services (other than in connection with administrative services
described in Section 5.04) and procurement services rendered by employees of the
General Partner and Affiliates of the General Partner (which services shall be
reasonably necessary to the prudent operation of the business and shall be
rendered upon
-20-
commercially reasonable terms, for compensation that is less than or equal to
90% of the compensation that would be charged by an unaffiliated third party,
and upon terms and conditions that are, in the reasonable judgment of the
General Partner (and in making such judgment the General Partner must not be
negligent or guilty of misconduct), as favorable to the Partnership as the terms
and conditions that the Partnership could obtain from unaffiliated third
parties, for the same purpose in the geographic location where the General
Partner has its place of business), (b) architectural and engineering services
(which must satisfy the conditions of Section 5.01E(viii) below), and (c)
services rendered pursuant to the Management Agreement, neither the General
Partner nor any Affiliate of the General Partner shall perform any service for
which compensation is to be paid by the Partnership, or sell or lease any goods
or materials to the Partnership or advance or lend any funds to the Partnership,
unless the agreements, contracts, and arrangements between the Partnership and
the General Partner or such Affiliate of the General Partner relating to such
services are performed in extraordinary circumstances and satisfy all of the
following conditions, those relating to good or materials satisfy all the
following conditions, and those relating to advances or loans to the Partnership
satisfy the conditions of Section 5.01E(vi) and Section 5.08(xvi) below:
(i) such services, goods, or materials must be reasonably
necessary to the prudent operation of the business of the Partnership;
(ii) the General Partner or any such Affiliate must have the
ability to render the services or to sell or lease the goods or
materials covered thereby and must have been previously engaged in the
business or rendering such services or selling or leasing such goods
or materials, independently of the Partnership and as an ordinary and
ongoing business;
(iii) such agreements, contracts, or arrangements must be fair to
the Partnership and reflect commercially reasonable terms and
conditions that, in the reasonable judgment of the General Partner
(and in making such judgment the General Partner must not be negligent
or guilty of misconduct), are as favorable to the Partnership as the
terms and conditions that the Partnership could obtain from
unaffiliated third parties for the same purpose, shall provide for
compensation to the General Partner or any such Affiliate at the
lesser of the actual cost or 90% of the competitive price that would
be charged for such services, goods, or materials by unaffiliated
third parties, and shall be embodied in a written contract which
precisely describes the subject matter thereof and all compensation to
be paid therefor, and the compensation and other terms thereof shall
be fully disclosed in the reports furnished to Limited Partners
pursuant to Sections 9.04B and 9.04C;
(iv) neither the General Partner nor any such Affiliate may
participate in any reciprocal business arrangements which would have
the effect of circumventing any of the provisions of this Agreement;
(v) no such agreement, contract, or arrangement as to which the
Limited Partners had previously given Consent may be amended in such
manner as to increase the fees or other compensation payable to the
General Partner or any such Affiliate or to decrease the
responsibilities or duties of the General Partner or any such
Affiliate in the absence of the Consent contemplated by Section
5.02B(iii);
(vi) any such agreement, contract, or arrangement which relates
to or secures any funds advanced or loaned to the Partnership by the
General Partner or any such Affiliate must reflect commercially
reasonable terms, such loan or advance must be on terms and conditions
that, in the reasonable judgment of the General Partner (and in making
such judgment the General Partner must not be negligent or guilty of
misconduct), are as favorable to the Partnership as the terms and
conditions that the
-21-
Partnership could obtain from unaffiliated third parties or banks for
the same purpose in the geographic location where the property
securing such loan is located (in the case of loans made in connection
with a single property or several properties in a single geographic
location) or, in all other cases, where the General Partner has its
principal place of business (without reference to the financial
abilities or guarantees of the General Partner or any Affiliate of the
General Partner), and no prepayment charge or penalty shall be
required on any such loan or advance; provided, however, that any
advances by Marriott under the Limited Debt Service Guarantee shall be
deemed to satisfy the provisions of this Section 5.01E(vi);
(vii) any such agreement, contract, or arrangement which relates
to the performance of services or to the sale or lease of goods or
materials (other than the Management Agreement) shall contain a clause
allowing termination without penalty on sixty days' notice;
(viii) with respect to architectural and engineering services for
the Inns, the Person rendering such services shall satisfy the
requirements of Section 5.01E(ii) (including the rendering of such
services to other properties owned or managed by the General Partner
or any of its Affiliates) and the compensation to and other
arrangements with such Person in connection therewith shall satisfy
the requirements of Sections 5.01E(iii) and (ix) (with actual cost
including the cost of any appraisal if required hereunder); provided,
however, that the cost of such services shall not exceed 90% of the
amount the Partnership would have been required to pay an unrelated
third party; and provided, further, that if the total cost of any
single improvement to any Inn shall exceed $250,000 and the General
Partner or any of its Affiliates shall have rendered architectural or
engineering services in connection with such improvement, the
Partnership shall obtain, at the General Partner's expense, an
appraisal of the fair market value of such improvement from an
independent appraiser and, if the cost of such improvement to the
Partnership (including the cost of such appraisal) exceeds its fair
market value, then the Person rendering such services shall not be
entitled to reimbursement of its costs of performing such services to
the extent of such excess; and
(ix) the General Partner and its Affiliates shall not be entitled
to compensation for the cost of (a) depreciation, utilities, capital
equipment, and other overhead and related administrative items related
to services performed hereunder (except that the General Partner and
its Affiliates may be reimbursed for computer time); and (b) salaries,
fringe benefits, travel expenses, and other administrative items
related to services performed hereunder incurred by or allocated to
any "controlling persons" of the General Partner or its Affiliates
(except that the General Partner and its Affiliates may be reimbursed
for travel expenses incurred in extraordinary circumstances and
directly attributable to the rendering of such services); for purposes
of this Section 5.01E(ix), "controlling persons" means "the chairman
or any member of the board of directors of the General Partner,
Marriott, Host, or other Affiliates of the General Partner; executive
management, including the president, vice-presidents, the secretary,
and the treasurer of the General Partner, Marriott, Host, and other
Affiliates of the General Partner; and any Person (including Host and
Marriott in their corporate capacities but not including employees
thereof unless otherwise included in "controlling persons") holding
five percent or more of the voting securities of the General Partner,
Marriott, Host, or such other Affiliates"; and the Partnership shall
not compensate the General Partner or its Affiliates for the actual
cost of services for which the General Partner or any of its
Affiliates is entitled to compensation by way of a separate fee, if
any.
-22-
F. In addition to any specific contracts or agreements described
herein, the Partnership may enter into any other contracts or agreements
specifically described in the Prospectus (including the Agency Agreement and the
Escrow Agreement, entered into in connection with the sale of the Units, which
agreements shall be deemed to satisfy all requirements of this Agreement)
without any further act, approval, or vote of the Limited Partners that are not
inconsistent with this Agreement.
Section 5.02. Restrictions on Authority of the General Partner.
A. Without the Consent of all of the Limited Partners, the General
Partner shall not have authority on behalf of the Partnership to:
(i) do any act in contravention of this Agreement;
(ii) except as otherwise provided in this Agreement, do any act
which would make it impossible to carry on the ordinary business of
the Partnership;
(iii) confess a judgment in excess of $100,000 against the
Partnership;
(iv) convert property of the Partnership to its own use, or
possess or assign any rights in specific property of the Partnership
for other than a purpose of the Partnership;
(v) admit a Person as a Limited Partner or as a General Partner,
except as provided in this Agreement;
(vi) perform any act that would subject any Limited Partner to
liability as a general partner in any jurisdiction or any other
liability except as provided for herein or under the Act;
(vii) list, recognize, or facilitate the trading of the Interests
(or any interest therein) on any "established securities market"
within the meaning of section 7704 of the Code, or permit any of its
Affiliates (or to the extent the General Partner has rights with
respect thereto, the Selling Agent or any of its Affiliates) to take
such actions, if as a result thereof the Partnership would be taxed
for Federal income tax purposes as an association taxable as a
corporation; or
(viii) create for the Interests (or any interest therein) a
"secondary market (or the substantial equivalent thereof)" within the
meaning of Section 7704 of the Code or otherwise permit, recognize, or
facilitate the trading of the Interests (or any interest therein) on
any such market, or permit any of its Affiliates (or to the extent the
General Partner has rights with respect thereto, the Selling Agent or
any of its Affiliates) to take such actions, if as a result thereof
the Partnership would be taxed for Federal income tax purposes as an
association taxable as a corporation.
B. Without the Consent of the Limited Partners, the General Partner
shall not have the authority on behalf of the Partnership to:
(i) have the Partnership acquire interests in other hotel
properties, in addition to the Inns, or in other assets not reasonably
related to the conduct of the Partnership's business as set forth in
Section 2.03;
(ii) sell any Inn to the General Partner or an Affiliate of the
General Partner unless the aforesaid Consent of the Limited Partners
has been obtained and the
-23-
following procedures have been followed: (a) the General Partner shall
give not less than 30 days' notice of the proposed sale to the Limited
Partners, which notice shall set forth the price and other material
terms and conditions on which the proposed transaction is to be
effected; (b) the Partnership shall obtain three appraisals of the
fair market sales value of the Inn to be sold, such appraisals to be
prepared by independent, nationally recognized appraisers experienced
in the valuation of hotel properties selected by the General Partner
(the cost of all such appraisals to be borne by the General Partner or
Affiliate); (c) such appraiser shall not have, directly or indirectly,
any material interest in or material business or professional
relationship with the General Partner or any of its Affiliates and the
compensation of each such appraiser shall be determined and embodied
in a written contract before such appraisal is prepared; (d) the price
at which the sale is effected shall not be less than the average of
the three amounts determined by the three appraisers, disregarding
entirely any appraisal that differs by more than 20% from the amount
determined by the appraiser whose determination is between the highest
and lowest of the amounts determined by the three appraisers (in the
case of a purchase pursuant to the right of first refusal granted to
the Manager, the price shall not be less than the higher of such
average or the price offered to the Partnership by a third party); (e)
the purchase price must be payable in cash; (f) no real estate
commission may be paid by the Partnership in connection with such
sale; and (g) the General Partner shall include copies of such
appraisals with the aforesaid notice to the Limited Partners;
(iii) effect any amendment to any agreement, contract, or
arrangement with the General Partner or any of its Affiliates which
adversely effects the rights of or benefits to the Limited Partners
or, in the case of the Purchase Agreement, the Ground Leases, the
Limited Debt Service Guarantee, and the Management Agreement, which
reduces the responsibilities or duties of the General Partner as a
general partner of the Partnership or any of its Affiliates under this
Agreement or any such other agreement, or which increases the
compensation payable to the General Partner or any of its Affiliates
hereunder or thereunder; provided, however, the foregoing shall not be
deemed to require the Consent of the Limited Partners for the General
Partner to cause the Partnership to enter into a new management
agreement with respect to the Inns, on terms substantially the same as
those in the Management Agreement as contemplated therein, in the
event of the refinancing of fewer than all of the Inns;
(iv) incur debt of the Partnership except as set forth in Section
5.01C(ii);
(v) agree to the addition of transient guest rooms at an Inn
unless the Inn has had an average occupancy rate of at least 70% for a
consecutive period of at least 13 Accounting Periods immediately prior
to commencement of construction of the addition;
(vi) make any election to continue beyond its term, discontinue,
or dissolve the Partnership;
(vii) voluntarily withdraw as a General Partner;
(viii) permit or cause the Partnership to incur any debt in
excess of $250,000 (except the debt pursuant to the Loan Agreement and
liabilities to Marriott and its Affiliates with respect to the Limited
Debt Service Guarantee) otherwise permitted to be incurred pursuant to
the terms of this Agreement if such debt would not constitute in its
entirety "qualified nonrecourse financing" within the meaning of
section 465(b)(6)(B) of the Code and the applicable Treasury
Regulations and a
-24-
Nonrecourse Liability, unless (a) the General Partner, in accordance
with its fiduciary duties as a general partner and taking into
consideration both the reasonably foreseeable tax consequences to the
Limited Partners as a group and the alternatives that the General
Partner believes are reasonably available to the Partnership,
determines that such action is not detrimental to the best interests
of the Limited Partners (and in making such determination, the General
Partner may rely upon an opinion of independent counsel as to the tax
consequences to the Limited Partners as a group), or (b) the General
Partner shall have obtained the Consent of the Limited Partners to
such action;
(ix) cause the Partnership to merge or consolidate with any other
entity;
(x) accept the substitution of more than five (5) Inns under the
Purchase Agreement; sell, lease, or otherwise dispose (or consent to
the sale, lease, or other disposition), directly or indirectly, in one
transaction or a series of related transactions, of the greater of (1)
15 of the Inns or any interest therein, or (2) a number of the Inns or
any interest therein for which the aggregate original purchase price
and Development Fee, as allocated in the Purchase Agreement, exceeds
30% of the total purchase price and Development Fee paid by the
Partnership for the Inns; or sell, lease, or otherwise dispose (or
consent to the sale, lease, or other disposition), directly or
indirectly, in one transaction or a series of related transactions, of
any of the Inns or any interest therein if the purchaser, lessee, or
other transferee is the General Partner or any Affiliate thereof,
except in accordance with Section 5.02B(ii);
(xi) cause the Partnership to sell all or substantially all of
the assets of the Partnership in one transaction or a series of
related transactions, except upon dissolution and liquidation in
accordance with Article Eight; or
(xii) cause the Partnership to incur any debt that would result
in Refinancing Proceeds being distributed to the Partners unless such
Refinancing Proceeds are distributed to the Partners in the same
taxable year in which the Partnership incurred such liability.
C. Any transaction between the Partnership and the General Partner or
an Affiliate that is effected with the requisite Consent of the Partners in
accordance with this Section 5.02 after disclosure to the Limited Partners of
all the material terms thereof shall be deemed to satisfy the requirements of
Section 5.01E.
Section 5.03. Duties and Obligations of the General Partner.
A. The General Partner shall take all action which may be necessary
or appropriate for the acquisition, development, maintenance, preservation, and
operation of the properties and assets of the Partnership in accordance with the
provisions of this Agreement and applicable laws and regulations (it being
understood and agreed, however, that the General Partner shall be permitted to
cause the partnership to contract with other Persons for the direct performance
of day-to-day management or operational services for the Inns and other
properties of the Partnership (and to pay fees therefor in such amounts as the
General Partner determines to be fair and equitable) and that the General
Partner shall have no obligation to perform such services itself, the General
Partner's obligation with respect thereto being limited to using its best
efforts to cause the Partnership to locate and employ a manager or operator to
perform such services). The General Partner shall have fiduciary responsibility
for the safekeeping and use of the funds and assets of the Partnership, whether
or not in the possession and control of the General Partner, and the General
Partner shall not employ or permit any other Person to employ such funds or
assets except in accordance with the terms of this Agreement. Notwithstanding
the foregoing, however, the General
-25-
Partner shall have no liability for any loss sustained by the Partnership as a
result of the bankruptcy, receivership, insolvency, or other economic failure of
any bank, savings and loan institution, other depositary of funds or entity to
or with which funds of the Partnership have been deposited or invested pursuant
to Section 9.03, so long as the General Partner would not have liability under
Section 5.06 in the selection of such depositary or the maintenance of
Partnership funds thereat.
B. The General Partner shall not (i) directly or through a subsidiary
engage in any business other than that of acting as general partner of the
Partnership, (ii) pay dividends or make other distributions or payments on its
stock or incur any obligations if, as a result, its net worth would be reduced
below the requirement of Section 5.03D, (iii) merge or consolidate with another
entity except Marriott or a wholly owned direct or indirect subsidiary of
Marriott, (iv) voluntarily dissolve, or (v) borrow any funds or become liable
for any obligations of third parties except to the extent that any such
borrowings or liabilities are directly related to meeting the financial needs of
the Partnership. Host and the General Partner agree that so long as the General
Partner is the general partner of the Partnership, its parent company, Host,
will not transfer its stock of the General Partner except to a wholly owned,
direct or indirect, subsidiary of Marriott and Marriott and the General Partner
agree that so long as the General Partner is the general partner of the
Partnership, Marriott will not sell the stock of Host unless the stock of the
General Partner is thereafter owned by Marriott or a wholly owned, direct or
indirect, subsidiary of Marriott. Marriott also shall pay to the Partnership,
upon demand, the amount of any losses incurred by the Partnership as a result of
the attachment by any creditor of Marriott or any of its Affiliates of any
Partnership funds held by or on behalf of the Manager pursuant to the Management
Agreement (including, without limitation, Inn working capital and net revenues
from Inn operations). In addition, in the event the General Partner fails to
make a required payment to the Partnership pursuant to Section 3.05C with
respect to a Foreign Investor who purchased Units in the Initial Public Offering
or any permitted transferee pursuant to Section 7.01I, Marriott shall pay to the
Partnership the amount required to be paid to the Partnership by the General
Partner thereunder and shall succeed to all rights and remedies of the General
Partner thereunder.
C. The General Partner shall devote to the Partnership such time as
may be necessary for the proper performance of its duties hereunder, but the
officers and directors of the General Partner shall not be required to devote
their full time to the performance of duties of the General Partner.
D. The General Partner shall have at the time of the admission of the
Initial Limited Partners, and shall use its reasonable best efforts to maintain
at all times thereafter, a net worth at an amount equal to at least $8,417,878
in excess of its investment in the Partnership.
E. The General Partner shall take such action as may be necessary or
appropriate in order to form or qualify the Partnership under the laws of any
jurisdiction in which the Partnership is doing business or owns property or in
which such formation or qualification is necessary in order to protect the
limited liability of the Limited Partners or in order to continue in effect such
formation or qualification.
F. Except as otherwise permitted in Section 5.02B(viii), the General
Partner shall at all times conduct its affairs and the affairs of the
Partnership and all of its Affiliates in such a manner that neither the
Partnership nor any Partner nor any Affiliate of any Partner will have any
personal liability on any Partnership Debt. The General Partner shall use its
best efforts, in the conduct of the Partnership's business, to put all suppliers
and other Persons with whom the Partnership does business on notice that the
Limited Partners are not personally liable for Partnership obligations, and all
agreements to which the Partnership is a party shall include a statement to the
effect that the Partnership is a limited partnership organized under the Act;
but the General Partner shall not be liable to the Partnership or to any Limited
Partner for any failure to
-26-
give such notice to such suppliers or other Persons or to have any such
agreement fail to contain such statement.
G. The General Partner shall prepare or cause to be prepared and
shall file on or before the due date (or any extension thereof) any Federal,
state or local tax returns required to be filed by the Partnership. The General
Partner shall cause the Partnership to pay any and all taxes payable by the
Partnership whether by way of withholding from distributions to the Partners or
otherwise.
H. The General Partner shall be under a duty to conduct the affairs
of the Partnership in good faith and in accordance with the terms of this
Agreement and in a manner consistent with the purposes set forth in Section
2.03. Nothing contained in this Agreement is intended or shall be construed to
contract away the fiduciary duty of the General Partner to the Limited Partners.
I. The General Partner shall use its best efforts to assure that the
Partnership shall not be deemed an investment company as such term is defined in
the Investment Company Act of 1940.
J. The General Partner shall monitor the transfers of Interests to
determine (i) if such Interests are being traded on an "established securities
market" or a "secondary market (or the substantial equivalent thereof)" within
the meaning of section 7704 of the Code, and (ii) whether additional transfers
of Interests would result in the Partnership being unable to qualify for at
least one of the "safe harbors" set forth in IRS Notice 88-75 (or such other
guidance subsequently published by the IRS setting forth safe harbors under
which Interests will not be treated as "readily tradable on a secondary market
(or the substantial equivalent thereof)" within the meaning of section 7704 of
the Code) (the "Safe Harbors"). The General Partner shall take (and cause its
Affiliates to take) all steps reasonably necessary or appropriate to prevent any
trading of Interests or any recognition by the Partnership of transfers made on
such markets and, except as otherwise provided herein, to ensure that at least
one of the Safe Harbors is met.
K. The General Partner shall maintain or cause to be maintained for
five (5) years after the closing of the Initial Public Offering a record of the
information obtained to indicate that the Initial Limited Partners met the
suitability standards employed in connection with the Initial Public Offering
and shall obtain a commitment from the Selling Agent to maintain the same record
of information required of the General Partner.
L. From time to time, the General Partner shall consider whether or
not, in the reasonable judgment of the General Partner, it would be in the best
interests of the Partnership to effectuate a sale or refinancing of all or a
portion of the Inns, with all or part of the Capital Receipts from any such sale
or refinancing to be distributed to the Partners in accordance with Article
Four. If the General Partner, in its reasonable judgment, determines that such
a sale or refinancing would be in the best interests of the Partnership, then
the General Partner shall, subject to Section 5.02B(x) in the case of a sale,
use its reasonable best efforts to cause the Partnership to effectuate such a
sale or refinancing. In the event that not all of the Inns have been sold or
otherwise disposed of prior to the year 2001, then, subject to Section 5.02B(x)
and to the Management Agreement and the Loan Agreement, the General Partner
shall use its reasonable best efforts to sell the remaining Inns, in one or more
transactions, as it determines appropriate in its reasonable judgment.
Section 5.04. Compensation of General Partner. The General Partner as
general partner of the Partnership shall not in such capacity receive any
salary, fees, profits, or distributions except the General Partner shall receive
such allocations and distributions to which it may be entitled under Article
Four or Article Eight. Notwithstanding the foregoing, however, the
-27-
Partnership shall reimburse the General Partner and its Affiliates for the
actual cost of goods and materials used for or by the Partnership and obtained
from unrelated third parties and for the actual cost of providing any
accounting, tax, and other administrative services required or contemplated by
this Agreement (excluding services required to be performed under the Management
Agreement) to the extent that such goods, materials, and services are reasonably
necessary to the prudent operation of the business of the Partnership and the
cost thereof is comparable to or less than the amount the Partnership would have
been required to pay to an unrelated third party. Notwithstanding the foregoing,
the General Partner and its Affiliates shall not be entitled to reimbursement
for (i) depreciation, utilities, capital equipment, and other overhead and
related administrative items (except that the General Partner and its Affiliates
may be reimbursed for computer time and other expenses to the extent incurred in
connection with the administration of the Partnership); and (ii) salaries,
fringe benefits, travel expenses, and other administrative items incurred by or
allocated to any "controlling persons" of the General Partner or its Affiliates
(except that the General Partner and its Affiliates may be reimbursed for travel
expenses incurred in extraordinary circumstances and directly attributable to
the rendering of reimbursable administrative services). For purposes of this
Section 5.04, "controlling persons" means "the chairman or any member of the
board of directors of the General Partner, Marriott, Host, or other Affiliates
of the General Partner; executive management, including the president, vice-
presidents, the secretary, and the treasurer of the General Partner, Marriott,
Host, and other Affiliates of the General Partner; and any Person (including
Host and Marriott in their corporate capacities but not including employees
thereof unless otherwise included in "controlling persons") holding five percent
or more of the voting securities of the General Partner, Marriott, Host, or such
other Affiliate." Notwithstanding the foregoing provisions of this Section 5.04,
the Partnership shall not reimburse the General Partner for expenses related to
services for which the General Partner or any of its Affiliates is entitled to
compensation by way of a separate fee, if any. All expenses of the Partnership
shall be billed directly to and paid by the Partnership, and, except as
expressly permitted by this Section 5.04, no reimbursement shall be made
therefor to the General Partner or any of its Affiliates. The General Partner
and its Affiliates may perform other services for the Partnership in accordance
with Section 5.01E.
Section 5.05. Other Business of Partners. Any Limited Partner may
engage independently or with others in other business ventures of every nature
and description. Nothing in this Agreement shall be deemed to prohibit any
Affiliate of the General Partner from dealing, or otherwise engaging in business
with Persons transacting business with the Partnership or from providing
services relating to the purchase, sale, financing, management, development, or
operation of hotels, motels, restaurants, or other food and lodging facilities
and receiving compensation therefor, even if competitive with the business of
the Partnership. Neither the Partnership nor any Partner shall have any right by
virtue of the relationship created hereby in or to such other ventures or
activities or to the income or proceeds derived therefrom, even if competitive
with the business of the Partnership. Neither the General Partner nor any
Affiliate of the General Partner shall be obligated to present any particular
opportunity (other than an opportunity that is within the scope of the purpose
of the Partnership specified in Section 2.03) to the Partnership even if such
opportunity is of a character which, if presented to the Partnership could be
taken by the Partnership, and any Affiliate of the General Partner shall have
the right to take for its own account (individually or as a trustee, partner, or
fiduciary) or to recommend to others any such particular opportunity.
Section 5.06. Limitation on Liability of General Partner;
Indemnification.
A. Subject to this Section 5.06, the General Partner shall not be
liable for the return of the Capital Contributions of the Limited Partners or
for any portion thereof, it being expressly understood that any return of
capital shall be made solely from the assets of the Partnership; nor shall the
General Partner be required to pay the Partnership or to any Limited Partner any
deficit in the Capital Account of any Partner upon dissolution or otherwise,
except as otherwise provided in Section 8.02E.
-28-
B. The General Partner shall have no liability, responsibility, or
accountability in damages or otherwise to any other Partner or to the
Partnership for, and the Partnership agrees to indemnify, pay, protect, and hold
harmless the General Partner (on the demand of and to the satisfaction of the
General Partner and to the extent permitted by law) from and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
proceedings, costs, expenses, and disbursements of any kind or nature whatsoever
(including, without limitation, all costs and expenses of defense, appeal, and
settlement of any and all suits, actions, or proceedings threatened or
instituted against the General Partner or the Partnership and all costs of
investigations in connection therewith) which may be imposed on, incurred by, or
asserted against the General Partner or the Partnership in any way relating to
or arising out of, or alleged to relate to or arise out of, any action or
inaction on the part of the Partnership, or on the part of the General Partner
as the general partner of the Partnership, including any action or inaction in
connection with the General Partner acting as Tax Matters Partner or Designated
Person under Section 5.07, if, but only if, (i) the action or inaction of the
General Partner giving rise thereto was determined by the General Partner, in
good faith, to be in the best interests of the Partnership; (ii) such action or
inaction shall have been on behalf of the Partnership and within the scope of
the authority granted to the General Partner by this Agreement or by law or by
the Limited Partners in accordance with this Agreement; and (iii) the General
Partner and its Affiliates were not guilty of negligence, fraud, misconduct, or
breach of fiduciary duty to the Partnership or any Partner. The satisfaction of
the obligations of the Partnership under this Section 5.06 shall be from and
limited to the assets of the Partnership and no Limited Partner shall have any
personal liability on account thereof. The provisions of this indemnification
shall also extend to any Person performing services for the Partnership on
behalf of the General Partner, within the scope of its authority as the General
Partner of the Partnership, who is an Affiliate of the General Partner, so long
as such Person satisfied the requirements of clauses (i), (ii), and (iii) above.
Notwithstanding any other provision of this Agreement, the Partnership shall not
incur any cost in excess of the cost of insuring the Partnership itself in
respect of any liability insurance that insures the General Partner or any other
Person for any liability with respect to which indemnity would be prohibited
under this Section 5.06B.
C. The General Partner shall have no liability or responsibility
hereunder to make loans, advances, or additional Capital Contributions to the
Partnership except as specified in Sections 3.04, 3.11A, and 8.02E and except as
may otherwise be provided as a matter of law or under the Loan Agreement.
However, except for advances made pursuant to the Limited Debt Service Guarantee
(which advances will be repaid in accordance with such guarantee), to the extent
the General Partner advances any funds to meet any liabilities or obligations of
the Partnership, any such advances shall be deemed loans to the Partnership by
the General Partner and, subject to Section 5.01E(vi), shall accrue interest per
annum at one percentage point in excess of the Prime Rate (or the highest lawful
rate under the laws of the State of Delaware, whichever is less) payable in
arrears on the first day of each Fiscal Quarter and such amounts shall be due
and payable upon that date which is the fifth anniversary of the date on which
any such advances were made; provided, however, that any and all such advances
governed by this Section 5.06C shall be paid prior to distributions to Partners
out of any Cash Available for Distribution to the Partners (except for
distributions with respect to the Partners' Preferred Distribution), upon the
liquidation or dissolution of the Partnership, or the distribution to the
Partners of any Capital Receipts from the sale of an Inn.
D. Notwithstanding the foregoing, neither the General Partner nor
any other Persons specified in Section 5.06B nor any Person acting as an
underwriter or broker-dealer on behalf of the Partnership shall be indemnified
by the Partnership for liabilities arising under Federal or state securities
laws unless (i) there has been a successful adjudication in favor of the
indemnitee on the merits of each count involving alleged securities law
violations, or such claims against the indemnitee have been dismissed with
prejudice on the merits by a court of competent jurisdiction, and, in either
case, indemnification of litigation costs is approved by a court of competent
jurisdiction, or (ii) a court of competent jurisdiction approves a settlement of
the claims against a
-29-
particular indemnitee and finds that indemnification of the settlement and
related costs should be made. In any claim for indemnification for Federal or
state securities law violations, the party seeking indemnification shall place
before the court the published positions of the Securities and Exchange
Commission, the Massachusetts Securities Division, the Missouri Securities
Division, the Pennsylvania Securities Commission, and any other state securities
commissions of states in which Units were offered or sold with respect to the
issue of indemnification for securities law violations. Notwithstanding any
other provision of this Agreement, the Partnership shall not incur the cost of
any liability insurance that insures the General Partner or any other Person for
any liability with respect to which indemnity would be prohibited under this
Section 5.06D.
E. The Partnership may not advance expenses or other costs incurred
by the General Partner (or any other Person described in Section 5.06B) in
defending any threatened or pending action, suit, or proceeding subject to this
Section 5.06.
F. In discharging its obligations under this Agreement, the General
Partner may obtain an opinion, appraisal, or examination by independent counsel,
appraiser, accountant, or other expert, if appropriate, and shall be entitled to
rely, to the extent reasonable, upon such opinion, appraisal, or examination for
matters within the expertise of the person or entity providing or rendering the
same.
Section 5.07. Designation of Tax Matters Partner and Designated
Person for Purposes of Investor List.
A. The General Partner shall act as the Tax Matters Partner of the
Partnership, as provided in Treasury Regulations pursuant to section 6231 of the
Code, and as the Designated Person for purposes of maintaining the Investor
List. Each Partner hereby approves of such designation and agrees to execute,
certify, acknowledge, deliver, swear to, file, and record at the appropriate
public offices such documents as may be deemed necessary or appropriate to
evidence such approval.
B. To the extent and in the manner provided by applicable Code
sections and Treasury Regulations thereunder, the Tax Matters Partner shall
furnish the name, address, profits interests, and taxpayer identification number
of each Partner (or assignee) to the IRS.
C. To the extent and in the manner provided by applicable Code
sections and Treasury Regulations thereunder, the Tax Matters Partner shall
inform each Partner of administrative or judicial proceedings for the adjustment
of Partnership items required to be taken into account by a Partner for income
tax purposes (such administrative proceedings being referred to as a "tax audit"
and such judicial proceedings being referred to as "judicial review").
D. The Tax Matters Partner is authorized, but not required:
(i) to enter into any settlement with the IRS with respect to any
tax audit or judicial review, and in the settlement agreement the Tax
Matters Partner may expressly state that such agreement shall bind all
Partners except that such settlement agreement shall not bind any
Partner (i) who (within the time prescribed pursuant to the Code and
Treasury Regulations thereunder) files a statement with the IRS
providing that the Tax Matters Partner shall not have the authority to
enter into a settlement agreement on behalf of such Partner or (ii)
who is a "notice partner" (as defined in section 6231 of the Code) or
a member of a "notice group" (as defined in section 6223(b)(2));
(ii) in the event that a notice of a final administrative
adjustment at the Partnership level of any item required to be taken
into account by a Partner for tax
-30-
purposes (a "final adjustment") is mailed to the Tax Matters Partner,
to seek judicial review of such final adjustment, including the filing
of a petition for readjustment with the Tax Court or the United States
Claims Court, or the filing of a complaint for refund with the
District Court of the United States for the district in which the
Partnership's principal place of business is located;
(iii) to intervene in any action brought by any other Partner
for judicial review of a final adjustment;
(iv) to file a request for an administrative adjustment with
the IRS at any time and, if any part of such request is not allowed by
the IRS, to file an appropriate pleading (petition or complaint) for
judicial review with respect to such request;
(v) to enter into an agreement with the IRS to extend the
period for assessing any tax which is attributable to any item
required to be taken into account by a Partner for tax purposes, or an
item affected by such item; and
(vi) to take any other action on behalf of the Partners or the
Partnership in connection with any tax audit or judicial review
proceeding to the extent permitted by applicable law or regulations.
E. Notwithstanding any other provision of this Agreement (but
subject to Sections 5.04, 5.06B, and 5.06D of this Agreement), the Partnership
shall indemnify and reimburse, to the full extent provided by law, the Tax
Maters Partner for all expenses, including legal and accounting fees (as such
fees are incurred), claims, liabilities, losses, and damages incurred in
connection with any tax audit or judicial review proceeding with respect to the
tax liability of the Partners, the payment of all such expenses to be made
before the distribution of Cash Available for Distribution to the Partners.
Neither the General Partner nor any of its Affiliates nor other Person shall be
obligated to provide funds for such purpose.
F. The taking of any action and the incurring of any expense by
the Tax Matters Partner in connection with any such proceeding, except to the
extent required by law, is a matter in the sole discretion of the Tax Matters
Partner and the provisions on limitations of liability of the General Partner
and indemnification set forth in Section 5.06 of this Agreement shall be fully
applicable to the Tax Matters Partner in its capacity as such.
5.08. Other Limitations. The following additional limitations shall
apply to the operation and management of the Partnership:
(i) no Cash Available for Distribution shall be reinvested in
the Inns or other Partnership assets;
(ii) except for such reserves as may be determined by the
General Partner, in its reasonable discretion, to be necessary to
provide for the foreseeable cash needs of the Partnership or for the
maintenance, repair, expansion, or restoration of the Inns, no Capital
Receipts shall be reinvested in the Inns or other Partnership assets
unless sufficient cash will be distributed to the Partners pursuant to
Article Four to pay any Federal or state income tax (assuming Partners
are in a combined Federal and state marginal income tax bracket of
35%) resulting from the transaction giving rise to such Capital
Receipts;
(iii) the General Partner shall not receive for its account any
kickbacks or rebates with respect to expenditures made by or on behalf
of the Partnership in the General Partner's role as the general
partner of the Partnership; nor shall the
-31-
General Partner enter into any reciprocal arrangement that has the
effect of circumventing this Section 5.08(iii);
(iv) no commission or other fee shall be payable to the General
Partner or any Affiliate, directly or indirectly, in connection with
the distribution or reinvestment of any Cash Available for
Distribution or Capital Receipts;
(v) the General Partner shall not directly or indirectly, pay
or award any commissions or other compensation to any Person for
encouraging or inducing any other Person to purchase Units; provided,
however, that nothing herein shall prohibit the payment of normal
sales commissions and fees to the underwriters or broker-dealers
(including, without limitation, the Selling Agent) in connection with
an offering of Interests in the Partnership;
(vi) any sale, purchase, or lease of any real property or any
interest therein by the Partnership, including, without limitation,
the Partnership's purchase of the Inns and exercise of any Site
Purchase Option, shall be supported by an appraisal report of an
independent, nationally recognized appraiser of hotel properties
selected by the General Partner and the sum of the purchase price paid
for such real property and Acquisition Fees payable by the Partnership
in connection with such purchase shall not exceed the appraised value
of such real property set forth in such appraisal report;
(vii) the total commissions payable to a Person in connection
with the sale of one or more of the Inns or other real estate owned by
the Partnership (solely for the sale of such real estate) shall be
limited to a competitive real estate commission not to exceed six
percent (6%);
(viii) neither the General Partner (other than in discharge of
its responsibilities under this Agreement, for which it shall receive
no fee or other compensation) nor any Affiliate shall be granted an
exclusive right to sell or exclusive employment to sell any Inn or
other real estate owned by the Partnership, and neither the General
Partner nor any Affiliate shall be paid any commission or other fee
for services in connection with the sale or other disposition of any
Inn or other real estate owned by the Partnership, provided that
nothing in this Section 5.08 shall be construed to limit the General
Partner's right to the allocations and distributions described in
Article IV;
(ix) neither the General Partner nor any Affiliate shall
provide insurance brokerage services in connection with obtaining
insurance on the Partnership's property;
(x) the Partnership shall commit at least 79.0% of the Capital
Contributions of the Limited Partners to Investment in Properties, as
described under "Use of Proceeds" in the Prospectus;
(xi) the Partnership shall cause the requirements of section
1707.09(J) of the Ohio Revised Code to be complied with in connection
with the Initial Public Offering if the Units are registered to be
offered and sold in Ohio, and in any event the General Partner shall
pay Organization and Offering Expenses to the extent the same exceeds
15% of the Capital Contributions of the Limited Partners;
(xii) the Partnership shall not purchase or lease any property
(other than goods or materials purchased in connection with the
operation of the Inns in
-32-
accordance with Section 5.01E or in connection with administration of
the Partnership in accordance with Section 5.04) in which the General
Partner or any Affiliate has an interest or cause the Partnership to
acquire any property from any partnership or joint venture in which
the General Partner or any Affiliate has an interest unless such
purchase or lease is pursuant to the Purchase Agreement or the Ground
Leases;
(xiii) the Partnership shall not incur mortgage indebtedness in
excess of 85% of the purchase price of the Inns (or such lesser amount
as may be permitted under the Loan Agreement) prior to a refinancing
of the debt incurred pursuant to the Loan Agreement or thereafter
incur mortgage indebtedness, except to the extent necessary to repay
the debt incurred pursuant to the Loan Agreement, in excess of 85% of
the aggregate fair market value of all refinanced Inns, as determined
by the lender as of the date of the refinancing;
(xiv) the Partnership shall not make any loans or otherwise
extend credit to the General Partner or any of its Affiliates;
(xv) the Partnership shall not lease any property to the
General Partner or any of its Affiliates;
(xvi) the Partnership shall not borrow any money from the
General Partner or any of its Affiliates, the principal amount of
which is scheduled to be paid over a period of 48 months or longer
and/or not less than 50% of the principal amount of which is scheduled
to be paid during the first 24 months, other than pursuant to Section
5.06C or the Limited Debt Service Guarantee;
(xvii) the Partnership shall not borrow any funds from the
General Partner or any Affiliate of the General Partner unless such
borrowing is in accordance with Section 5.01(E)(vi) and Section 5.06C;
(xviii) the Partnership shall not acquire any property in
exchange for Interests in the Partnership; and
(xix) the Partnership shall not invest in limited partnership
interests, general partnership interests, or joint ventures.
ARTICLE SIX
WITHDRAWAL AND REMOVAL OF GENERAL PARTNER
Section 6.01. Limitation on Voluntary Withdrawal. Except as provided
in Section 5.02B(vii), the General Partner shall not have the right (but shall
have the power) to retire or withdraw voluntarily from the Partnership, and any
withdrawal in violation hereof shall constitute a breach of this Agreement and
shall be subject to the provisions of Section 6.03. Prior to any voluntary
withdrawal, the General Partner shall give the Limited Partners notice of its
intention to withdraw at least 90 days in advance of such withdrawal and the
Limited Partners may, by Consent of the Limited Partners, elect a substitute
General Partner. If a substitute General Partner is elected, it shall be
admitted immediately prior to the withdrawal of the General Partner and shall
continue the business of the Partnership without dissolution. The General
Partner shall not sell, transfer, or assign its entire general partner Interest
or any portion thereof other than as provided below. The General Partner shall
be permitted to assign its Interest in the Net Profits, Net Losses,
-33-
Losses, Gains, Cash Available for Distribution, Capital Receipts, and other
allocations and distributions only to a wholly owned Affiliate, subject to the
following conditions:
(i) the General Partner shall not be permitted to assign such
rights unless the General Partner receives an opinion of counsel that
such assignment shall not cause any material adverse tax consequences
to the Partnership or the Limited Partners or cause a default on any
Partnership debt obligation;
(ii) notwithstanding such assignment by the General Partner of
its Interest in the Net Profits, Net Losses, Gains, Cash Available for
Distribution, or Capital Receipts as provided above, upon any such
assignment (A) the General Partner shall not cease to be a general
partner of the Partnership, and shall continue to be a general partner
of the Partnership, and (B) the General Partner shall not cease to
have any and all rights and powers of a general partner under this
Agreement and the Act and shall continue to have any and all such
rights and powers and the assignee shall not acquire any such rights
and powers of a general partner; and
(iii) following any such assignment, the Interest of the General
Partner in the Net Profits, Net Losses, Gains, Losses, Cash Available
for Distribution, Capital Receipts, and other allocations and
distributions shall be not less than 1% thereof.
Section 6.02. Bankruptcy or Dissolution of the General Partner. In
the event of the bankruptcy of the General Partner or other event that causes
the General Partner to cease to be a general partner under Sections 17-402(6),
(7), (8), (9), or (10) of the Act, the General Partner shall cease to be the
General Partner and its Interest shall terminate; provided, however, that such
termination shall not effect any rights or liabilities of the General Partner
which matured prior to such event, or the value, if any, at the time of such
event of the Interest of the General Partner.
Section 6.03. Liability of Withdrawn General Partner. If the General
Partner shall cease to be General Partner of the Partnership, it shall be and
remain liable for all obligations and liabilities incurred by it as General
Partner prior to the time such withdrawal shall have become effective, but it
shall be free of any obligation or liability incurred on account of the
activities of the Partnership from and after the time such withdrawal shall have
become effective. Any withdrawal by the General Partner except in accordance
with Sections 5.02B(vii) and 6.01 shall constitute a breach of this Agreement.
If the General Partner withdraws in violation of this Agreement, (a) the
Partnership shall be entitled to recover from the withdrawn General Partner
damages for breach of this Agreement and offset such damages against the amount,
if any, otherwise distributable to it in addition to any remedies otherwise
available under applicable law, and (b) the General Partner's Interest as
General Partner in the Partnership shall be treated as the Interest of a removed
General Partner under Section 6.04 and shall be reduced by 50% (which reduction
of the General Partner's interest is not a penalty). In addition, if the General
Partner withdraws from the Partnership (whether with Consent of the Limited
Partners or in violation of this Agreement), the General Partner's Interest
shall be subject to purchase in the same manner as the interest of a removed
General Partner; provided, however, that the purchase price payable in
connection with any such purchase shall be paid by a non-interest bearing
promissory note with principal payable, if at all, from distributions the
General Partner otherwise would have received from this Agreement had the
General Partner not withdrawn.
Section 6.04. Removal of General Partner. In the event of the removal
of the General Partner pursuant to Section 10.02B, the removed General Partner's
Interest as General Partner in the Partnership shall become a limited partner
interest but without any voting or consensual rights which other Limited
Partners may have (except the right to continue the business of the Partnership
and to appoint one or more general partners as provided in Section 6.05A, with
respect to which the General Partner agrees that it will consent in writing to
such action); provided,
-34-
however, that if the General Partner is removed pursuant to Section 10.02B and
if the notice of the meeting or solicitation of Consent for such removal
contained a statement (which shall have been true) that the General Partner
breached any of its obligations under Section 5.03, breached any of the
restrictions under Section 5.02, committed an act of fraud, committed any act of
misconduct, bad faith, gross negligence, or breach of fiduciary duty of loyalty
in carrying out its duties as the general partner which was not remedied within
30 days, or breached any other provision of this Agreement which was not
remedied within 30 days after notification thereof, then its Interest will be
reduced by fifty percent (50%). Such reduction of the General Partner's interest
is not a penalty. In the event of the removal of the General partner pursuant to
Section 10.02B, then the Partnership shall have the right (but not the
obligation) to purchase the removed General Partner's interest in the
Partnership (determined after giving effect to the preceding sentence) within 60
days of such removal (or if later, upon the determination of the "present fair
market value" of such interest as set forth below) at the "present fair market
value" of such interest. For purposes of the preceding sentence, the "present
fair market value" of the removed General Partner's Interest in the Partnership
shall be the amount agreed to between the Partnership and the removed General
Partner or, in the absence of such an agreement, the amount determined by
arbitration in accordance with the then current rules of the American
Arbitration Association. Payment of the purchase price for the removed General
Partner's Interest may be made, at the election of the Partnership, in cash or
by a promissory note bearing interest at the Prime Rate (but not higher than the
maximum lawful rate) and providing for payment of principal in five equal annual
installments. The expense of all arbitrations pursuant to this Section 6.04
shall be borne equally by the Partnership and the removed General Partner.
Section 6.05. Continuation and Reconstitution.
A. Upon the occurrence of an event described in Section 8.01A(ii),
(iii), or (iv), any remaining General Partner and any substitute General Partner
shall be obligated to continue the business of the General Partner without
dissolution. In the event that, upon the occurrence of such an event, there is
no remaining General Partner or substitute General Partner or there is no
remaining or substitute General Partner who agrees to continue the business of
the Partnership, in breach of the obligation set forth in the preceding
sentence, then the Partnership shall be dissolved and its affairs shall be wound
up unless, within 90 days after the occurrence of such event, all Partners agree
in writing to continue the business of the Partnership and to the appointment,
effective as of the date of such event, of one or more additional general
partners.
B. If, upon the occurrence of an event described in Section
8.01A(ii), (iii), or (iv) at a time when there is no remaining or substitute
General Partner or there is no remaining or substitute General Partner who
agrees to continue the business of the Partnership, in breach of the obligation
set forth in the first sentence of Section 6.05A, the Partnership is not
continued in accordance with Section 6.05A, then, within an additional 90 days
after the period referred to above, the Limited Partners, by Consent of the
Limited Partners, may elect to reconstitute the Partnership and continue its
business on the same terms and conditions set forth in this Agreement by forming
a new limited partnership on terms identical to those set forth in this
Agreement (except to the extent that such terms are amended by Consent of the
Limited Partners in order to reflect the interests, allocations, fees, benefits,
rights, duties, and obligations of the successor general partner) and having as
a general partner a Person approved by a Consent of the Limited Partners.
Except as amended by Consent of the Limited Partners as aforesaid, the successor
general partner shall have all of the rights, duties, and obligations of the
former General Partner and shall have a 1% interest in the Net Profits, Net
Losses, Gains, Losses, Cash Available for Distribution, Capital Receipts, and
other allocations and distributions. Upon any such Consent of the Limited
Partners, all Partners shall be bound thereby and shall be deemed to have
approved thereof. Unless such an election is made within 180 days after the
occurrence of an event described in such Section, the Partnership shall continue
only activities necessary to wind up its affairs. If such an election is so
made within 180 days after the occurrence of such an event, then:
-35-
(i) the reconstituted Partnership shall continue until the end
of the term set forth in Section 2.04 unless earlier dissolved in
accordance with terms of this Agreement;
(ii) if the successor general partner is not the former General
Partner, then, subject to Section 6.04, the interest of the former
General Partner shall be treated thenceforth as a limited partner
interest; and
(iii) all necessary steps shall be taken to cancel this Agreement
and the Certificate of Limited Partnership and to enter into a new
partnership agreement and certificate of limited partnership, and the
successor general partner may for this purpose exercise the powers of
attorney granted the General Partner pursuant to this Agreement;
provided that the action of the Limited Partners, by Consent of the
Limited Partners, to approve a successor general partner and to
reconstitute and to continue the business of the Partnership, as
provided in this Section 6.05B (which actions shall not be taken and
such reconstitution shall not be effective until 15 days following
such vote), shall be void ab initio if prior to or within 15 days
after such vote either: (A) the Partnership shall have received an
opinion of counsel, satisfactory to the Limited Partners as provided
in Section 10.02C, that such action may not be effected without
adversely affecting the liability of the Limited Partners under the
Act or a court having jurisdiction over the matter shall have entered
a judgment subject to no further appeal to such effect; or (B) the
Partnership shall have received an opinion of counsel, satisfactory to
the Limited Partners as provided in Section 10.02C, that such action
may not be effected without changing the Partnership's status as a
partnership for federal income tax purposes, or a court having
jurisdiction over the matter shall have entered a judgment subject to
no further appeal to such effect, or the IRS shall have issued a
ruling to such effect.
ARTICLE SEVEN
ASSIGNABILITY OF UNITS
Section 7.01. Restrictions on Assignments. After the admission to
the Partnership of the Initial Limited Partners, a Limited Partner shall have
the right to assign any Interest (which for purposes of this Agreement shall
include any form of assignment, transfer, alienation or hypothecation of any
Interest), subject to the following limitations:
A. No assignment of any Interest, either wholly or in part and
whether absolute or for collateral purposes, may be made other than on the first
day of a Fiscal Quarter (commencing on or after the first day of the first full
Fiscal Quarter of the Partnership).
B. No assignment of any Interest may be made if the assignment is
pursuant to a transaction constituting a "sale or exchange" (within the meaning
of section 708(b)(1)(B) of the Code) of the Interest and if the Interest sought
to be assigned, when added to the total of all other Interests assigned within a
period of 12 consecutive months prior thereto, would, in the opinion of legal
counsel for the Partnership, result in the Partnership being deemed to have been
terminated within the meaning of section 708 of the Code. The General Partner
shall give Notification to all Limited Partners in the event that sales or
exchanges should be suspended for such reason. Any suspended sales or exchanges
shall be made (in chronological order to the extent practicable) as of the first
day of an Accounting Period after the end of any such 12-month period, subject
to the provisions of this Article Seven.
-36-
C. The General Partner may prohibit any assignment of an Interest in
the Partnership if, in the opinion of legal counsel to the Partnership, such
assignment would require filing of a registration statement under the Securities
Act of 1933 or would otherwise violate any Federal or state securities or Blue
Sky laws (including any investment suitability standards) or regulations
applicable to the Partnership or the Units.
D. No purported assignment by a Limited Partner of any Unit after
which the assignor or the assignee would hold at least a fraction of a Unit but
less than five Units, will be permitted or recognized (except for assignments by
gift, inheritance or family dissolution or assignments to Affiliates of the
assignor).
E. No transfer, assignment, or negotiation on any date of an
Interest may be made to any Person if (i) in the opinion of legal counsel for
the Partnership, it would result in the Partnership being treated as an
association taxable as a corporation, or (ii) such transfer is effectuated
through an "established securities market" or a "secondary market (or the
substantial equivalent thereof)" within the meaning of section 7704 of the Code.
F. No purported transfer or assignment of any Interest, or any
beneficial interest therein, may be made, and any such purported transfer will
be void ab initio, if, as a result of such transfer, the Partnership would be
unable to satisfy at least one of the Safe Harbors. Notwithstanding the
foregoing, if the Partnership shall have received a favorable IRS ruling or
opinion of counsel satisfactory to the General Partner to the effect that such
transfer will not result in the Partnership being classified as a "publicly
traded partnership" within the meaning of section 7704 of the Code, this Section
7.01F shall not apply to such transfer.
G. No assignment of any Interest may be made to any Person unless
such Person agrees in writing that such Person will not, directly or indirectly,
create for the Units, or facilitate the trading of Units on, a "secondary market
(or the substantial equivalent thereof)," within the meaning of section 7704 of
the Code.
H. No assignment of any Interest may be made if, in the opinion of
legal counsel to the Partnership, it would result in the Partnership not being
able to obtain or continue in effect any license permitting the service or sale
of alcoholic beverages in an Inn.
I. No assignment of any Interest may be made to any Person who is
not a "United States person" within the meaning of section 7701(a)(30) of the
Code, except that this limitation shall not apply to a Limited Partner who is
(i) a Foreign Investor (as defined in Section 3.05(C), or an Affiliate of a
Foreign Investor, who purchases Units in the Initial Public Offering, or (ii) a
Foreign Investor, or an Affiliate of a Foreign Investor, who acquires the
Interest from a Person qualifying under clause (i) above; it being intended that
Units sold to a Foreign Investor or an Affiliate of a Foreign Investor in the
Initial Public Offering shall not be subject to this limitation unless and until
such Units are acquired by a "United States person" who is not an Affiliate of a
Foreign Investor.
J. No assignment of any Interest may be made to any Person generally
exempt from Federal income tax under section 501 of the Code or otherwise.
K. No transfer or assignment of any Interest may be made unless the
proposed assignee has provided the General Partner with (i) a fully completed
and executed Application and Assignment and Admission as Substituted Limited
Partner in the form set forth on the reverse side of the Unit Certificate and
(ii) such other information as the General Partner may reasonably request.
-37-
L. The General Partner may prohibit transfers of Units for the
remainder of a taxable year, notwithstanding that any such transfer would not in
itself violate any restrictions on transfers contained in this Section 7.01, if
the General Partner, in good faith and based upon the advice of counsel to the
Partnership, determines that such action is necessary or advisable in order to
protect the Partnership from possible failure to meet at least one of the Safe
Harbors. No purported transfer or assignment shall be of any effect unless all
of the foregoing conditions have been satisfied. The General Partner is
authorized to impose any other limitations or restrictions on the assignment of
Interests to the extent that it, in the exercise of its reasonable discretion
and based upon the advice of counsel to the Partnership, determines such further
limitations or restrictions are necessary or advisable to protect the
Partnership from being considered a "publicly traded partnership," within the
meaning of section 7704 of the Code. The General Partner shall, from time to
time, review the limitations and restrictions on the assignment of Interests
then in effect and the Federal income tax law, regulations, and rulings
applicable thereto, and shall eliminate or modify any such limitation or
restriction to make it less restrictive on assignment of Interests if the
Partnership shall have received an opinion of counsel that such elimination or
modification may be made without causing the Partnership to fail to meet at
least one of the Safe Harbors or be considered an association taxable as a
corporation under the applicable federal income tax laws.
M. No assignment of any Interest may be made to any Person who is
related (within the meaning of section 1.752-1T(h) of the Treasury Regulations)
to Sumitomo Trust & Banking Co., Ltd., New York Branch or any subsequent lender
to the Partnership (other than Marriott, the General Partner or an Affiliate
thereof) whose loan is Nonrecourse Debt.
Section 7.02. Assignees and Substituted Limited Partners.
A. If a Limited Partner dies, the executor, administrator or
trustee, or, if a Limited Partner is adjudicated incompetent or insane, the
committee, guardian or conservator, or, if a Limited Partner becomes bankrupt,
the trustee or receiver of the estate, shall have all the rights of a Limited
Partner for the purpose of settling or managing the estate and such power as the
decedent, incompetent, or bankrupt Limited Partner possessed to assign all or
any part of the Units and to join with the assignee thereof in satisfying
conditions precedent to such assignee becoming a Substituted Limited Partner.
The death, dissolution, adjudication of incompetence or bankruptcy of a Limited
Partner in and of itself shall not dissolve the Partnership.
B. The Partnership will not recognize for any purpose any assignment
of any Interest unless (i) there shall have been filed with the Partnership not
less than 15 days prior to the first day of the next Fiscal Quarter commencing
following such filing, a duly executed and acknowledged counterpart of the
instrument making such assignment (in the form set forth on the reverse side of
the Unit Certificate) signed by both the assignor and the assignee and a duly
executed Application and Admission as Substituted Limited Partner, which
instrument evidences, inter alia, the written acceptance by the assignee of all
of the terms and provisions of this Agreement, and (ii) the General Partner has
determined that such an assignment is permitted under Article Seven and
evidenced such determination by executing the Application for Assignment and
Admission as Substituted Limited Partner. Irrespective of whether or not any
successor to a Limited Partner or a purported assignee of a Limited Partner's
Interest hereunder provides the aforesaid instruments, any such Person shall be
bound by the terms and provisions of this Agreement.
C. Subject to the provisions of this subparagraph 7.02C, no assignee
of a Limited Partner's Interest shall be entitled to become a Substituted
Limited Partner unless:
(i) the General Partner shall have given its written consent
thereto, which consent may be withheld in its absolute discretion;
-38-
(ii) the transferring Limited Partner and the assignee shall
have executed and acknowledged such other instrument or instruments as
the General Partner may deem necessary or desirable to effect such
admission;
(iii) the assignee shall have accepted, adopted, and approved in
writing all of the terms and provisions of this Agreement, as the same
may have been amended, and executed a power of attorney similar to
the power of attorney granted in this Agreement; and
(iv) the assignee shall pay or obligate itself to pay, as the
General Partner may require, all reasonable expenses incurred in
connection with his admission as a Substituted Limited Partner (except
that the cost of any opinions of counsel referred to in this Article
Seven shall be borne by the Partnership). An assignee of a Limited
Partner's Interest shall become a Substituted Limited Partner only
when the General Partner has reflected the admission of such Person as
a Limited Partner in the books and records of the Partnership. The
General Partner shall take action once each Fiscal Quarter to reflect
in the books and records all Persons, if any, approved for admission
to the Partnership as Substituted Limited Partners since the last such
action.
D. Limited Partners who shall have assigned all their interest in
any Interests in accordance with the provisions of this Article Seven shall
cease to be Limited Partners of the Partnership with respect to such Interests
as of the date that such assignment is given effect the Partnership in
accordance with the terms of this Article Seven. A purported assignment of an
Interest not in accordance with the provisions of this Article Seven shall not
be given effect for any purpose.
E. Any Person who is the assignee of any of the Interest of a
Limited Partner in accordance with the terms of this Article Seven, but who does
not become a Substituted Limited Partner shall be entitled to all the rights of
an assignee of a limited partner interest under the Act, including the right to
receive distributions from the Partnership and the share of Net Profits, Gain,
Net Losses, Loss and recapture income attributable to the Interests assigned to
such Person, but shall not be deemed to be a holder of Units for any other
purpose under this Agreement. In the event any such Person desires to make a
further assignment of any such Interests, such Person shall be subject to all
the provisions of this Article Seven to the same extent and in the same manner
as any Limited Partner desiring to make an assignment of the Interests. In the
event that Units are assigned in accordance with this Article Seven and such
assignment is recognized by the General Partner in accordance with this
Agreement but the assignee thereof is not admitted as a Substituted Limited
Partner, such Units shall be voted in any matter presented to the Limited
Partners for a vote in the same proportion as all Units held by Limited Partners
are voted.
F. There shall be no restrictions on the assignments of Interests
except as provided in Article Six or this Article Seven. The Partnership shall
not impose any fee on the assignment of Interests in excess of the lesser of the
actual costs incurred by the Partnership in connection with such assignment or
$150.
ARTICLE EIGHT
DISSOLUTION AND LIQUIDATION OF THE PARTNERSHIP
Section 8.01. Events Causing Dissolution.
-39-
A. The Partnership shall be dissolved and its affairs wound up on
the first to occur of the following events:
(i) the bankruptcy of the Partnership; or
(ii) the withdrawal (whether or nor in accordance with this
Agreement) or removal of the General Partner, unless there is, at the
time of the occurrence of such event, a remaining or substitute
General Partner that continues the business of the Partnership
pursuant to its obligations under Section 6.05A or the Partnership is
continued pursuant to Section 6.05A; or
(iii) the bankruptcy of the General Partner, unless there is, at
the time of the occurrence of such event, a remaining or substitute
General Partner that continues the business of the Partnership
pursuant to its obligation under Section 6.05A or the Partnership is
continued pursuant to Section 6.05A; or
(iv) the occurrence of any event listed in Section 17-402(6),
(7), (8), (9), or (10) of the Act where the General Partner shall
cease to be a general partner unless there is, at the time of the
occurrence of such event, a remaining or substitute General Partner
that continues the business of the Partnership pursuant to its
obligation under Section 6.05A or the Partnership is continued
pursuant to Section 6.05A;
(v) the sale or other disposition of all or substantially all
of the property of the Partnership; or
(vi) action of the Limited Partners pursuant to Section
10.02B(ii); or
(vii) the expiration of the term of the Partnership.
Dissolution of the Partnership shall be effective on the day on which the event
occurs giving rise to the dissolution. The Partnership shall not terminate
until the assets of the Partnership shall have been liquidated as provided in
Section 8.02 and all proceeds therefrom have been collected. Notwithstanding
the dissolution of the Partnership, prior to the termination of the Partnership,
as aforesaid, the business of the Partnership and the affairs of the Partners as
such, shall continue to be governed by this Agreement.
B. Except as otherwise provided in Section 8.02E, the Partners shall
look solely to the assets of the Partnership for all distributions with respect
to the Partnership and their Capital Contribution thereto, and shall have no
recourse therefor (upon dissolution or otherwise) against the General Partner or
any Limited Partner.
Section 8.02. Liquidation.
A. Upon dissolution of the Partnership and the failure to
reconstitute the Partnership as provided in Section 6.05B, the General Partner
(or if the dissolution is caused by the occurrence of an event described in
Section 8.01A(ii), (iii), or (iv), then a Person that may be designated as
"liquidating trustee" by the Consent of the Limited Partners, which "liquidating
trustee" shall have all of the powers of the General Partner under this
Agreement for purposes of liquidating and winding up the affairs of the
Partnership) (the term "General Partner" as used in this Section 8.02 shall be
deemed to mean the "liquidating trustee" where appropriate) shall liquidate the
assets of the Partnership and the proceeds of such liquidation shall be applied
and distributed in the following order of priority:
(i) to the payment of the expenses of the liquidation;
-40-
(ii) in satisfaction of Partnership Debt and all other
liabilities of the Partnership (whether by payment or making
reasonable provision for payment thereof) owing to creditors of the
Partnership other than Partners who are creditors;
(iii) in satisfaction of any liabilities of the Partnership
(whether by payment or making reasonable provision for payment
thereof) owing to Partners who are creditors of the Partnership; and
(iv) to the General Partner and to the Limited Partners, in
proportion to the net balances in their respective Capital Accounts
(after the adjustments required pursuant to Article Four of this
Agreement in respect of Net Profits, Net Losses, Gains, and Losses
have been reflected therein), to reduce any net balances then existing
in the Capital Accounts of the Partners.
B. Notwithstanding the foregoing, in the event the General Partner
shall determine that an immediate sale of all or part of the Partnership assets
would cause undue loss to the Partners, the General Partner, in order to avoid
such loss, after having given Notification to all the Limited Partners, to the
extent not then prohibited by the limited partnership act of any jurisdiction in
which the Partnership is then formed or qualified and applicable in the
circumstances, may defer liquidation of and withhold from distribution for a
reasonable time any assets of the Partnership except those necessary to satisfy
the Partnership's debts and obligations, provided that the liquidation shall be
carried out in conformity with the timing requirements of section 1.704-
1(b)(2)(ii)(b) of the Treasury Regulations.
C. No assets of the Partnership shall be distributed in kind.
D. The General Partner shall cause the liquidation and distribution
of all the Partnership's assets and shall cause the cancellation of the
Partnership's certificate of limited partnership upon completion of winding up
the business of the Partnership.
E. Upon the dissolution and termination of the Partnership or a
liquidation of the Interest of the General Partner, if, after giving effect to
Sections 8.02A through 8.02D hereof for the Fiscal Year in which such
dissolution or liquidation occurs, there shall be a deficit in the Capital
Account of the General Partner, while there is a positive balance in the Capital
Account of any other Partner, the General Partner shall contribute to the
Partnership (in cash) the amount of such deficit, which thereupon shall be
distributed by the Partnership pro rata to any Partners possessing positive
balances in their respective Capital Accounts. Such contribution by the General
Partner is to be made to the Partnership not later than the later of the close
of the taxable year in which the dissolution or liquidation (as defined in
section 1.704-1(b)(2)(ii)(g) of the Treasury Regulations) occurs or 90 days
after the date of such dissolution of liquidation.
Section 8.03. Constructive Termination. In the event that the
Partnership terminate by reason of section 708(b)(1)(B) of the Code, but no
event of dissolution has occurred under Section 8.01 of this Agreement, the
assets of the Partnership shall, for Federal income tax purposes only, be deemed
to have been distributed in kind to the Partners in the same manner as if the
Partnership were liquidated under Section 8.02 of this Agreement, and to have
been immediately contributed to a successor partnership (for Federal income tax
purposes) subject to this Agreement. The Capital Accounts of the Partners
thereupon shall be restated in accordance with section 1.704-1(b) of the
Treasury Regulations, and allocations of items of Partnership income, gain, loss
and deduction for book as well as tax purposes shall thereafter be made in
accordance with the terms of this Agreement, section 1.704-1(b) of the Treasury
Regulations, and section 704(c) of the Code, applicable.
-41-
ARTICLE NINE
BOOKS AND RECORDS, ACCOUNTING, REPORTS, TAX ELECTIONS, ETC.
Section 9.01. Books and Records.
A. The books and records of the Partnership shall be maintained by
the General Partner in accordance with applicable law at the principal office of
the Partnership and shall be available for examination at such location by any
Partner or such Partner's duly authorized representatives at any and all
reasonable times. All appraisal reports obtained by the Partnership, whether in
connection with the acquisition of the Inns or otherwise, shall be retained by
the Partnership for at least five years from the date thereof and shall be
available for inspection and duplication by Limited Partners and their
designated representatives.
B. Each Limited Partner, and each such Limited Partner's duly
authorized representative, shall have the right, at reasonable times and at such
Limited Partner's own expense, upon prior written notice to the General Partner
(which notice shall be given a reasonable length of time in advance in light of
the scope of such request, and in no event less than five business days in
advance), (i) to have true and full information regarding the status of the
business and financial condition of the Partnership as is possessed by the
General Partner; (ii) to inspect and copy the books of the Partnership and other
reasonably available records and information as is possessed by the General
Partner concerning the operation of the Partnership, including copies of any
appraisal reports described in subparagraph A above and copies of the Federal,
state, and local income tax returns of the Partnership; (iii) to have a current
list of the name and last known business, residence, or mailing address of each
Partner mailed to such Limited Partner or representatives; (iv) to have true and
full information regarding the amount of cash and a description and statement of
the value of any property services contributed to the Partnership and the date
upon which each Partner became a Partner; and (v) to have a copy of this
Agreement, the Certificate of Limited Partnership and all amendments or
certificates of amendment, as the case may be, thereto, together with copies of
any powers of attorney pursuant to which any such amendment or certificate of
amendment has been executed.
Section 9.02. Accounting and Fiscal Year. The books of the
Partnership will be kept on the accrual basis. The Partnership will report is
operations for tax purposes on the accrual method. The Fiscal Year of the
Partnership shall end December 31 in each year.
Section 9.03. Bank Accounts and Investments. The bank accounts of
the Partnership shall be maintained in such banking institutions as the General
Partner shall determine (which institutions shall not be the General Partner or
any of its Affiliates), and withdrawals shall be made only in the regular course
of Partnership business on such signature or signatures as the General Partner
may determine. All deposits and other funds not needed in the operation of the
business or not yet invested may be invested in U.S. government securities,
securities issued or guaranteed by U.S. government agencies, securities issued
or guaranteed by states or municipalities, certificates of deposit and time or
demand deposits in commercial banks, bankers' acceptances, savings and loan
association deposits, or deposits in members of the Federal Home Loan Bank
System. Except as expressly permitted pursuant to the Management Agreement, the
funds of the Partnership shall not commingled with the funds of any other Person
(including the General Partner or any Affiliate of the General Partner).
Section 9.04. Reports. The General Partner shall deliver to each
holder of Units the following:
A. As soon as practicable but in no event later than 75 days after
the end of each Fiscal Year of the Partnership (90 days after the end of the
initial Fiscal Year of the Partnership if
-42-
the closing of the Initial Public Offering occurs in 1989), such information as
shall be necessary for the preparation by such holder of a Federal income tax
return, and state income or other tax returns with regard to the jurisdictions
in which the Inns are located. Such information shall include computation of the
distributions to such holder and the allocation to such holder of the Net
Profits or Net Losses, as the case may be, and any Gain or Loss, as the case may
be, recognized by the Partnership during such Fiscal Year; and
B. Within 120 days after the end of each Fiscal Year of the
Partnership, a report prepared by the General Partner which report shall set
forth the following:
(i) a statement of assets, liabilities, and Partners' capital, a
statement of income and expenses on an accrual basis, a statement of
cash flow, and a statement of changes in Partner's capital, prepared
by the General Partner on the accrual basis of accounting, in
accordance with generally accepted accounting principles, which
statements are to be audited and reported on by a firm of independent
public accountants selected by the General Partner, setting forth its
opinion as to the items in this clause (i);
(ii) the balances in the Capital Accounts of the Limited Partners
in the aggregate and of the General Partner and the identity and
amount of all sources of cash distributed or to be distributed to the
Partners in respect of such Fiscal Year;
(iii) a report (which need not be audited, but verification of
the reimbursed expenses covered by such report shall be within the
scope of the statement provided pursuant to Section 9.04B(i) of this
Agreement) summarizing the fees, commissions, compensation, and other
remuneration and reimbursed expenses paid by the Partnership for such
Fiscal Year to the General Partner or any Affiliate of the General
Partner and the services performed for the Partnership in connection
therewith;
(iv) a report of the activities of the Partnership for such
Fiscal Year.
(v) a budget (which need not be audited) setting forth the
expected Net Profits and Net Losses per Unit for the current Fiscal
Year; and
(vi) with respect to each covered by the financial forecast
included in the Prospectus, a table comparing the forecasts included
in the Prospectus with the actual results during the period covered by
the report. The report of the firm of the independent public
accountants certifying the items in clause (i) above shall include:
(a) a statement that an audit of such financial statements
has been made in accordance with generally accepted accounting
standards and that such financial statements are in conformity
with generally accepted accounting principles;
(b) a statement of the opinion of the firm of independent
public accountants with respect to the financial statements and
the accounting principles and practices reflected therein and in
regard to the consistency of the application of such accounting
principles; and
(c) an identification of any matters reflected in such
financial statements to which such firm takes exception.
-43-
C. Within 60 days after the end of each of the first three Fiscal
Quarters of each Fiscal Year of the Partnership, the General Partner shall send
to each Person who was a holder of Units at any time during the Fiscal Quarter
then ended (i) a balance sheet (which need not be audited); (ii) a profit and
loss statement (which need not be audited); (iii) a statement of cash flow for
such Fiscal Quarter (which need not be audited) (all of the foregoing statements
to be prepared in accordance with generally accepted accounting principles);
(iv) a statement setting forth any transactions between the Partnership and the
General Partner or any Affiliate thereof, the amount of any fees received by
either the General Partner or any Affiliated thereof for services rendered to
the Partnership, and a description of such services; and (v) any other pertinent
information regarding the Partnership and its activities during the period
covered by the report.
D. Concurrent with the report sent pursuant to Section 9.04C for the
third Fiscal Quarter of each Fiscal Year, the Partners will be furnished an
estimate of Net Profits or Net Losses per Unit for such Fiscal Year.
E. The General Partner may prepare and deliver to the holders of the
Units from time to time in its sole discretion during each Fiscal Year, in
connection with cash distributions or otherwise, unaudited statements showing
the results of operations of the Partnership to the date of such statement.
F. The General Partner shall prepare and file such registration
statements, annual reports, quarterly reports, current reports, proxy
statements, and other documents, if any, as may be required under the Securities
Exchange Act of 1934 and the rules and regulations of the Securities and
Exchange Commission thereunder.
Section 9.05. Tax Depreciation and Elections.
A. With respect to all depreciable assets of the Partnership, the
General Partner may, in its sole discretion, elect to use such depreciation
method for Federal tax purposes as it deems appropriate and in the best interest
of the Partners generally.
B. The General Partner may, in its sole and absolute discretion, make
an election under section 754 of the Code and shall make such other tax
elections under Federal, state, or local law as it may from time to time deem
necessary or appropriate.
Section 9.06. Interim Closing of the Books. There shall be an
interim closing of the books of account of the Partnership (i) at the date of
the admission to the Partnership of the Initial Limited Partners, (ii) at any
time a taxable year of the Partnership ends pursuant to the Code, and (iii) at
such other times as the General Partner shall determine are required by good
accounting practice or may be appropriate under the circumstances.
Section 9.07. Information from Limited Partners. The holders of
Units shall, within 30 days of a written request by the General Partner, furnish
to the General Partner such information or execute such forms or certificates as
the General Partner shall reasonably require for the purpose of complying with
Federal, state or other tax requirements. Without further request, each Foreign
Investor shall furnish to the General Partner each year not later than February
15 of such year two properly completed copies of IRS Form 4224 ("Exemption from
Withholding of Tax on Income Effectively Connected with the Conduct of a Trade
or Business in the United States") or such other forms as may be required to
claim exemptions from withholding.
ARTICLE TEN
-44-
MEETING AND VOTING RIGHTS
OF LIMITED PARTNERS
Section 10.01. Meetings.
A. Meetings of the Limited Partners for any purpose may be called by
the General Partner and shall be called by the General Partner upon receipt of a
request in writing signed by holders of 10% or more of the Units held by Limited
Partners. Such request and any notification from the General Partner shall
state the purpose of the proposed meeting and the matters proposed to be acted
upon thereat. If the meeting is called pursuant to such a request, notification
of such meeting shall be sent to the Limited Partners by certified mail within
ten business days after receipt of such a request and any such meeting shall be
held on a date not less than 15 no more than 60 days after receipt of such
request. Any meeting may be held at the principal office of the Partnership or
at such other location which is reasonably convenient to the Partners and which
is within the United States as the General Partner may deem appropriate or
desirable. In addition, the General Partner may, and, upon receipt of a request
in writing signed by holders of 10% or more of the Units held by Limited
Partners, the General Partner shall, submit any matter (upon which the Limited
Partners are entitled to act by Consent of the Limited Partners) to the Limited
Partners for a vote without a meeting.
B. Notification of any meeting (other than a meeting called pursuant
to Section 10.01A) shall be given not less than 10 days nor more than 60 days
before the date of the meeting to the Limited Partners at their record
addresses, or at such other address which they may have furnished in writing to
the General Partner. Any Notification of a meeting pursuant to Section 10.01A or
this Section 10.01B shall be in writing, and shall state the place, date, hour
and purpose of the meeting, and shall indicate that it is being issued at or by
the direction of the Partner or Partners calling the meeting. The hour of the
meeting shall be during normal business hours. If a meeting is adjourned to
another time or place, and if any announcement of the adjournment of time or
place is made at the meeting, it shall not be necessary to give Notification of
the adjourned meeting. The presence in person or by proxy of Limited Partners
holding a majority of the outstanding Units shall constitute a quorum at all
meetings of the Limited Partners; provided, however, that if there be no such
quorum, Limited Partners holding a majority of the Units so present or so
represented may adjourn the meeting from time to time without further notice,
until a quorum shall have been obtained. No Notification of the time, place, or
purpose of any meeting of Limited Partners need be given to any Limited Partner
who attends in person or is represented by proxy (except when a Limited Partner
attends a meeting for the express purpose of disapproving at the beginning of
the meeting the transaction of any business on the ground that the meeting is
not lawfully called or convened), or to any Limited Partner entitled to such
notice who, in a writing executed and filed with the records of the meeting,
either before or after the time thereof, waives such Notification.
C. For the purpose of determining the Limited Partners entitled to
vote at any meeting of the Partnership or any adjournment thereof, the General
Partner may fix, in advance, a date as the record date for any such
determination of Limited Partners. Such date shall be not more than 60 days nor
less than 10 days before any such meeting.
D. The Limited Partners may authorize any Person to act for them by
proxy in all matters in which a Limited Partner is entitled to participate,
whether by waiving notice of any meeting or voting or participating at a
meeting. Every proxy must be signed by the Limited Partner or the Partner's
attorney-in-fact. No proxy shall be valid beyond the period permitted by law.
Every proxy shall be revocable at the pleasure of the Limited Partner or the
Limited Partner's attorney-in-fact executing it.
-45-
E. At each meeting of Limited Partners, the General Partner shall
appoint such officers and adopt such rules for the conduct of such meeting as
the General Partner shall deem appropriate.
F. As and to the extent that the Securities Exchange Act of 1934 is
applicable to the procedural rules governing any meeting of Limited Partners
(including any proxies or proxy statement related thereto), the provisions of
such act shall take precedence over any provision of this Section 10.01 which
may be inconsistent therewith.
Section 10.02. Special Voting Rights of Limited Partners.
A. If at any time any agreement (including the Management Agreement)
pursuant to which operating management of any property of the Partnership is
vested in the General Partner or an Affiliate of the General Partner provides
that the Partnership has a right to terminate such agreement as a result of the
failure of the operation of such property to attain any economic objective or as
result of a default of the General Partner or such Affiliate thereunder, the
Limited Partners, without the Consent of the General Partner, may, by Consent of
the Limited Partners, take action to exercise the right of the Partnership to
terminate such agreement.
B. To the extent not inconsistent with the Act or other applicable
law, the Limited Partners, may, by Consent of the Limited Partners without the
Consent of the General Partners, vote to:
(i) amend this Agreement; provided, however, that (a) the
allocable percentage interests of the Partners in the allocations set
forth in Article Four may not be altered, and no new material
obligation may be imposed on any Partner, without such Partner's
approval, and (b) the provisions of Section 2.03 may not be altered
without the consent of the General Partner;
(ii) dissolve the Partnership;
(iii) remove the General Partner, such removal to be effective
upon the date set forth in the resolution adopted by such Consent of
the Limited Partners, provided that any such action for removal must
also provide for the appointment of a substitute General Partner by
Consent of the Limited Partners (such substitute General Partner to be
admitted as a general partner immediately prior to the effective date
of removal of the General Partner to be removed and such substitute,
together with any then remaining general partners, shall continue the
business of the Partnership without dissolution); provided further,
however, that if prior to or within 15 days after such vote either:
(A) the Partnership shall have received an opinion of counsel,
satisfactory to the Limited Partners as provided in Section 10.02C,
that such action may not be effected without adversely affecting the
liability of the Limited Partners under the Act or a court having
jurisdiction over the matter shall have entered a judgment subject to
further appeal to such effect; or (B) the Partnership shall have
received an opinion of counsel, satisfactory to the Limited Partners
as provided in Section 10.02C, that such action may not be effected
without changing the Partnership's status as a partnership for federal
income tax purposes, or a court having jurisdiction over the matter
shall have entered a judgment subject to no further appeal to such
effect, or the IRS shall have issued a ruling to such effect, then
such vote shall be void ab initio; provided further, that following
such vote, no other actions shall be taken and the removal and
appointment shall not be effective until the expiration of the 15-day
period described above;
-46-
(iv) elect a substitute General Partner to the extent provided in
Section 6.01 or reconstitute and continue the Partnership as provided
in Section 6.05B; or
(v) cause the Partnership to sell all or substantially all of the
assets of the Partnership.
C. For the purposes of Sections 6.05B and 10.02B(iii), counsel shall
be deemed to be satisfactory to the Limited Partners if (i) such counsel is not
counsel for the General Partner or any Affiliate of the General Partner and (ii)
either (a) such counsel shall have been proposed by the General Partner and
affirmatively approved within 45 days by Consent of the Limited Partners, (b)
such counsel shall have been proposed for such proposes by the holders of 10% or
more of the Units held by Limited Partners and affirmatively approved within 45
days by Consent of the Limited Partners, or (c) consent of the Limited Partners
to any action pursuant to Sections 6.05B or 10.02B shall have been obtained
without the proposal or selection of any counsel. The existence of an opinion
of counsel, court judgment, or IRS ruling to the effect described in Section
6.05B or 10.02B with respect to a particular contemplated action shall not
affect the rights of Limited Partners to vote on other future actions or the
existence of such rights.
ARTICLE ELEVEN
MISCELLANEOUS PROVISIONS
Section 11.01. Appointment of General Partner as Attorney-in-Fact.
A. Each Limited Partner irrevocably constitutes and appoints the
General Partner and the President, any Vice President, Secretary, Treasurer,
Assistant Secretary, and Assistant Treasurer of any corporate General Partner as
his true and lawful attorney-in-fact with full power and authority in such
Limited Partner's name, place, and stead to execute, acknowledge, deliver, swear
to, file, and record at the appropriate public offices such documents as may be
necessary or appropriate to carry out the provisions of this Agreement,
including but not limited to:
(i) all counterparts of this Agreement, and any amendment or
restatement thereof, including all certificates and instruments, which
the General Partner deems appropriate to form, qualify, or continue
the Partnership as a limited partnership (or a partnership in which
the Limited Partners will have limited liability comparable to that
provided by the Act) in the jurisdictions in which the Partnership may
conduct business or in which such formation, qualification, or
continuation is, in the opinion of the General Partner, necessary or
desirable to protect the limited liability of the Limited Partners;
(ii) all amendments to this Agreement adopted in accordance with
the terms hereof and all instruments which the General Partner deems
appropriate to reflect a change or modification of the Agreement in
accordance with the terms hereof;
(iii) all documents or instruments which the General Partner
deems appropriate to reflect the admission of a Limited Partner
(including any Substituted Limited Partner), in accordance with this
Agreement, the dissolution of the Partnership (including a certificate
of cancellation), sales or transfers of Partnership property, sales or
transfers of Partnership Interests, or the initial amount or increase
or reduction in amount of any Partner's Capital Contribution or
reduction in any Partner's Capital Account in accordance with the
terms of this Agreement; and
-47-
(iv) any instrument, certificate, or document to implement the
provisions of Section 5.01C(vi) or Section 3.05C.
B. The appointment by all Limited Partners of the General Partner and
the aforesaid officers of any corporate General Partner as attorney-in -fact
shall be deemed to be a power coupled with an interest, in recognition of the
fact that each of the Partners under this Agreement will be relying upon the
power of the General Partner to act as contemplated by this Agreement in any
filing and other action by it on behalf of the Partnership, and shall survive,
and not be affected by, the subsequent bankruptcy, death, incapacity,
disability, adjudication of incompetence or insanity, or dissolution of any
Person hereby giving such power and the transfer or assignment of all or any
part of the Units or Interest of such Person; provided, however, that in the
event of the transfer by a Limited Partner of all such Limited Partner's
Interest, the foregoing power of attorney of a transferor Partner shall survive
such transfer only until such time as the transferee shall have been admitted to
the Partnership as a Substituted Limited Partner and all required documents and
instruments shall have been duly executed, filed, and recorded to effect such
substitution.
Section 11.02. Amendments.
A. Subject to the provisions of Section 7.02, each Initial Limited
Partner, Substituted Limited Power, and any successor General Partner, whether
or not such Person becomes a signatory hereof shall be deemed, solely by reason
of having become a Partner, to have adopted, and to have agreed to be bound by
all the provisions of this Agreement. Without limiting the foregoing, each
Initial Limited Partner, Substituted Limited Partner, and any successor General
Partner shall take any action requested by the General Partner (including,
without limitation, executing this Agreement or such other instrument or
instruments as the General Partner shall determine) to reflect such Person's
adoption of, and agreement to be bound by all the provisions of, this Agreement.
B. In addition to the amendments otherwise authorized herein,
amendments may be made to this Agreement from time to time by the General
Partner with the Consent of the Limited Partners; provided, however, that
without the Consent of all Partners, this Agreement may not be amended so as to
(i) convert the Interest of a Limited Partner into a general partner's Interest;
(ii) adversely affect the liability of a Limited Partner; (iii) alter the
Interest of a Partner in Net Profits, Net Losses, Gain, Loss, or distributions
of Cash Available for Distribution, Sale Proceeds, or Refinancing Proceeds, or
reduce the percentage of Partners which is required to Consent to any action
hereunder; (iv) limit in any manner the liability of the General Partner as
provided in Section 3.09; (v) permit the General Partner to take any action
prohibited by Section 5.02A; (vi) cause the Partnership to be taxed for Federal
income tax purposes as an association taxable as a corporation; or (vii) effect
any amendment or modification to this Section 11.02B.
C. If this Agreement shall be amended to reflect the withdrawal,
removal, bankruptcy or any event described in Section 17-402(6), (7), (8), (9),
or (10) of the Act where the General Partner shall cease to be a general partner
when the business of the Partnership is being continued, such amendment shall be
signed by the withdrawing General Partner (and the General Partner hereby agrees
to do so) and by the successor General Partner.
D. In making any amendments, there shall be prepared and filed for
recordation by the General Partner such documents and certificates as shall be
required to prepared and filed, no such filing being required solely by reason
of this Agreement, under the Act and under the laws of the other jurisdictions
under the laws of which the Partnership is then formed or qualified, not less
frequently, in the case of substitution of a Limited Partner, than once each
calendar quarter.
E. The General Partner may, without the Consent of the Limited
Partners, make any amendment to this Agreement (i) as is necessary solely to
clarify provisions thereof so long
-48-
as such amendment does not adversely affect the rights of the Limited Partners
under this Agreement, or (ii) is expressly permitted by Section 5.01C(vi).
Section 11.03. General Partner Representations and Warranties. The
General Partner represents that, except to the extent expressly permitted by
Section 5.06B, the Partnership shall not incur the cost of any insurance which
insures any party against any liability as to which such party is prohibited
from being indemnified under this Agreement.
Section 11.04. Binding Provisions. The covenants and agreements
contained here shall be binding upon, and inure to the benefit of, the heirs,
executors, administrators, personal representatives, successors, and assigns of
the respective parties hereto.
Section 11.05. Applicable Law. Notwithstanding the place where
this Agreement may be executed by any of the parties hereto, this Agreement, the
rights and obligations of the parties hereto, and any claims and disputes
relating thereto shall be subject to and governed by the Act and the other laws
of the State of Delaware as applied to agreements among Delaware residents to be
entered into and performed entirely within the State of Delaware, and such laws
shall govern all aspects of this Agreement, including, without limitation, the
limited partnership aspects of this Agreement.
Section 11.06. Counterparts. This Agreement may be executed in
several counterparts, all of which together shall constitute one agreement
binding on all parties hereto, notwithstanding that all the parties have not
signed the same counterpart.
Section 11.07. Separability of Provisions. Each provision of this
Agreement shall be considered separable and if for any reason any provision or
provisions hereof are determined to be invalid and contrary to any existing or
future law, such invalidity shall not impair the operation of or affect those
portions of this Agreement which are valid.
Section 11.08. Article and Section Titles. Article and section
titles are for descriptive purposes only and shall not control or alter the
meaning of this Agreement as set forth in the text.
Section 11.09. Short Form Filings. The General Partner shall have
authority to sign any short-form Certificate of Limited Partnership or restated
or amended Certificate of Limited Partnership meeting the requirement of
applicable law which reflects this Agreement, as same may be amended.
Section 11.10. Submissions to State Securities Law Administrators.
Pursuant to registration applications, the Partnership shall submit to state
securities administrators of states in which the Units were offered or sold,
upon request, any report or statement required by this Agreement to be
distributed to the Limited Partners.
-49-
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first above written.
GENERAL PARTNER:
MARRIOTT FIBM ONE CORPORATION
By: /s/
-----------------------------------------
Its: President
----------------------------------------
ORGANIZATIONAL LIMITED PARTNER:
CHRISTOPHER G. TOWNSEND
/s/ Christopher G. Townsend
----------------------------------------
LIMITED PARTNERS:
All Limited Partners now and hereafter
admitted to the Partnership as limited
partners of the Partnership, pursuant to
powers of attorney and authorizations now
and hereafter executed in favor of and
granted and delivered to the General Partner
Marriott FIBM One Corporation, as attorney-
in-fact for all Limited Partners
By: /s/
-----------------------------------------
Its: President
----------------------------------------
Solely for purposes of the obligations contained in Section 5.03B, the
undersigned have executed this Agreement as of the date first above written.
Marriott Corporation
By: /s/
-----------------------------------------
Its: Vice President & Assistant Treasurer
----------------------------------------
Host International, Inc.
By: /s/
-----------------------------------------
Its: Vice President & Assistant Treasurer
----------------------------------------
-50-