EXHIBIT 3.a
AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP OF
MARRIOTT DIVERSIFIED AMERICAN HOTELS, L.P.
This Amended and Restated Agreement of Limited Partnership dated as of
February 7, 1990 is made and entered into by and among Marriott MDAH One
Corporation, a Delaware corporation, as general partner (the "General Partner"),
Christopher G. Townsend, as initial limited partner (the "Initial 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 Partners").
Marriott Diversified American Hotels, L.P. (the "Partnership") was formed
pursuant to a Certificate of Limited Partnership dated as of October 4, 1989
filed with the Secretary of State of the State of Delaware on October 6, 1989.
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.
"Act" means the Delaware Revised Uniform Limited Partnership Act (6 Del C.
(S)(S)17-101, et seq.), as amended from time to time.
"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 Person" means, when used with reference to a
specified Person, (i) any Person that directly or indirectly through one or more
intermediary, 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 on trustee, or with respect to
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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 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, and (v) any relative or
spouse of the specified Person who makes his or her home with that of the
specified Person.
"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; provided,
however, that (i) as and to the extent the Placement Agent retained by the
General Partner to assist in the private placement of the Units foregoes any
portion of its fees or selling commissions, with a consequent reduction in the
offering price of any Units so placed, or (ii) as and to the extent any Limited
Partner elects to make a payment of $88,396 per Unit in cash ($81,396 per Unit
in cash if purchased by the General Partner, the Placement Agent, or qualified
officers, directors or employee, of Marriott or its Affiliates) upon execution
of the subscription documents as full payment of his Capital Contribution, the
Limited Partners purchasing any such Units nevertheless shall be deemed to have
contributed to the Partnership the full amount of the offering price (i.e.,
$100,000 per Unit) without reduction on account of such reduced purchase price.
For purposes of determining Net Invested Capital, Partners' 10% Preferred
Distribution and amounts described in Sections 4.06(ii) and 4~07A(ii) only,
Capital Contributions shall be deemed to be equal to the following amounts:
$6,272,727 from the date of the initial closing of the offering pursuant to the
Private Placement Memorandum through June 19, 1990 ($6,210,000 with respect to
the Limited Partners and $62,727 with respect to the General Partner);
$16,727,272 from June 20, 1990 through June 19, 1991 ($16,560,000 with respect
to the Limited Partners and $167,272 with respect to the General Partner);
$29,272,727 from June 20, 1991 through June 19, 1992 ($28,980,000 with respect
to the Limited Partners and $292,727 with respect to the General Partner) (each
of which amounts is determined assuming that all Units are purchased on the
installment basis, that all installments are paid on their due dates, and that
the General Partner's Capital Contribution is paid in installments on the same
dates and in the proportions as the installments of the Limited Partners'
Capital Contributions); and $41,818,182 thereafter (which amount represents
aggregate Capital Contributions of $100,000 per Unit by the Limited Partners and
$418,182 by 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' 15% 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, an amount equal to the cash revenues of the Partnership from all sources
(other than Capital Receipts) during such fiscal period (including amounts
received pursuant to the Purchase Price Adjustment mechanism and interest income
on Partnership working capital) plus such reserves as may be determined by the
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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 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 capital transactions, 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 Hotels.
"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 officers, directors or employees of the General Partner or
any of its Affiliates who own Units for their own accounts) 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.
"Debt Service Guarantee" means the guarantee by Marriott in an amount not
exceeding $13 million of interest and principal due under the Permanent Loan if
the Partnership is unable to make such payments.
"Defaulting Limited Partner" means a Limited Partner who fails to pay all
or any portion of any installment of his Investor Note for a period of 10 days
after the date such installment was due.
"Defaulting Limited Partner Allocations" means allocations of Net Losses,
Net Profits, Gains, Losses, and tax credits to a Defaulting Limited Partner.
"Default Notice" means the notice given by the General Partner to the
Partnership and the Defaulting Limited Partner of the General Partner's desire
to purchase all or a portion of a Defaulting Limited Partner's Interest.
"Deferred Purchase Debt" means the indebtedness of the Partnership to
Marriott and its Affiliates of up to $30.386 million to permit the Partnership
to pay a portion of the purchase price of the deferred portion of the Hotels
(other than the Hotel located in Dayton, Ohio), with interest accruing at the
lesser of 10% per annum or the maximum rate permitted by applicable law and with
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principal and accrued interest due on August 1, 1992, but required to be prepaid
our of the proceeds of the installments of the Capital Contributions to be paid
by the Limited Partners.
"Designated Person" means the General Partner.
"Fairview Park Hotel" means the Marriott full-service 394-room Fairview
Park Hotel located in Fairfax County, Virginia, the land on which the hotel is
located, and the lease relating to the land on which the Hotel's parking garage
is located.
"FF&E" means (i) furniture, fixtures, furnishings, vehicles, carpeting,
and equipment and (ii) routine repairs and maintenance undertaken subsequent to
the opening date of a Hotel or addition thereto, the cost of which would not be
expensed under generally accepted accounting principles.
"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 Partner's 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, which shall end on
December 31 of each year.
"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 a Hotel), as reduced by the costs of
such sale or disposition.
"General Partner" means Marriott MDAH 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 Lease" means the lease between the Partnership, as tenant, and a
certain third party, as landlord, by which the Partnership will lease the land
on which the Hotel located in Fullerton, California is situated.
"Host" means Host International, Inc., a Delaware corporation and wholly
owned subsidiary of Marriott.
"Hotels" means the Marriott full-service hotel properties as described in
Schedule I to this Agreement and the land on which each of the Hotels is located
(or, in the case of the hotel located in Fullerton, California, the tenant's
interest in the Ground Lease).
"Initial Limited Partner" means Christopher G. Townsend.
"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.
"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.
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"Investor Note" or "Investor Notes" means the fully recourse, non-interest
bearing promissory notes given by the Limited Partners to evidence their
obligation to pay the deferred portion of the Capital Contributions due with
respect to their Units.
"IRS" means the Internal Revenue Service.
"Limited Partner" means the Initial Limited Partner, the Original Limited
Partners, or any Substituted Limited Partner.
"Loan Agreement" means the loan agreement to be entered into between the
Partnership, as borrower, and The Citizens and Southern National Bank, as
lender, to provide the Permanent Loan.
"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 a Hotel) taking into account costs of such sale or disposition.
"Management Agreement" means the management agreement to be entered into
at the initial closing of the offering made pursuant to the Private Placement
Memorandum between the Partnership and the Manager pursuant to which the Manager
will manage the Hotels, as the same may be amended or supplemented from time to
time.
"Manager" means Marriott Hotels, Inc., a Delaware corporation and wholly
owned subsidiary of Marriott, as manager of the Hotels and any successor manager
that is an Affiliate of Marriott.
"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).
"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 nor in connection with the sale of a
Hotel 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 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.
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"Original Limited Partners" means each Person purchasing Units in
connection with the initial offering of the Units made pursuant to the Private
Placement Memorandum.
"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-IT(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. Reference to a "Partner" means any one of
the Partners.
"Partners' 10% Preferred Distribution" means, with respect to each Fiscal
Year, an annual non-cumulative amount, payable to the Partners from
distributions from Cash Available for Distribution, equal to 10% of the average
daily outstanding Capital Contributions from time to time.
"Partners' 15% Preferred Distribution" means the excess of (a) the product
of (x) 15% per annum (applied using the simple interest method for the period
from the date of the admission of the Original Limited Partners through the date
for which the determination is being made on the basis of a 365/366-day year and
the actual number of days 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), 4.05(a)(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 4~05(a)(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 loan made to the Partnership pursuant to the
loan agreement to be entered into at the initial closing of the offering made
pursuant to the Private Placement Memorandum between the Partnership, as
borrower, and The Citizens and Southern National Bank as lender, pursuant to
which the lender will lend $128 million to finance a portion of the purchase
price of the Hotels.
"Person" means any individual, partnership, corporation, trust, or other
legal entity.
"Placement Agent" means Smith Barney, Harris Upham & Co. Incorporated.
"Prime Rate" means the base rate of interest announced from time to time
by Bankers Trust Company, New York, New York.
"Private Placement Memorandum" means the Partnership's confidential
private placement memorandum dated November 14, 1989, prepared for use in
connection with the offering to investors of 414 Units of limited partnership
interests in the Partnership.
"Purchase Agreement" means the purchase agreement to be entered Into at
the initial closing of the offering made pursuant to the Private Placement
Memorandum between the Partnership and Marriott and certain of its Affiliates
providing for the purchase by the Partnership of the Hotels, the assignment of
the Ground Lease relating to the Hotel located in Fullerton, California and the
sale or assignment of a leasehold interest In certain related materials and
personal property, including FF&E
"Purchase Price Adjustments" means any reductions of the aggregate
purchase price payable for the Hotels pursuant to the Purchase Agreement.
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"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, 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.
"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, and (C) all amounts payable therefrom pursuant to the
Management Agreement, and adding any amounts contributed to the Partnership by
the General Partner pursuant to Section 3.04B. Sale Proceeds shall not include
the proceeds from the routine sale or other disposition of used FF&E not in
connection with the disposition of a Hotel.
"Section 267(d) Gain" means gain realized by the Partnership but not
recognized solely by reason of section 267(d) of the Code.
"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.
"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 the Treasury.
"Unit" means a unit of limited partnership interest represented by a
Capital Contribution of $100,000 (determined without reductions for purchase of
a Unit in circumstances where the Placement Agent foregoes all or a portion of
the fees and commissions payable to it and/or purchases where the full purchase
price is paid in cash at the time of subscription), sold in the private
placement pursuant to the Private Placement Memorandum.
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 October 6, 1989 pursuant to the provisions of the
Act.
Section 2.02. Name and Offices. The name of the Partnership is and shall
be Marriott Diversified American Hotels, L.P. 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
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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 (i) invest
in, acquire, own, use, operate and manage the Hotels, either as full-service
Marriott hotels or otherwise, sell, lease, sublease, exchange, or otherwise
dispose of the Hotels, and (ii) engage in any other activities related or
incidental thereto, as more fully set forth in Section 5.01 hereof.
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, 2089, 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 October 6, 1989, the
General Partner, in accordance with the Act, fled 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 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 MDAH 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. Initial Limited Partner. The Initial Limited Partner who is
hereby admitted as the initial limited partner of the Partnership is Christopher
G. Townsend, 10 Paramus Court, North Potomac, Maryland 20878. Upon admission to
the Partnership of the Original Limited Partners, the Initial 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
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.
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Section 3.04. Capital Contributions by General Partner.
A. The General Partner has made a Capital Contribution in the amount of
$418,182. The General Partner shall not be permitted to make any additional
Capital Contributions without the Consent of the Limited Partners except as
required pursuant to Sections 3.04B, 3.04C, or 8.02E.
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 5 days of the date such payment is made.
C. The General Partner shall contribute to the Partnership an amount equal
to the lesser of (i) the excess of (A) Partnership administrative expenses for
Fiscal Years 1989 (if the closing of the private placement pursuant to the
Private Placement Memorandum occurs in 1989), 1990, 1991 and 1992 over (B)
interest paid to the Partnership on "Partnership working capital" (which, as
used herein, shall not include reserves established pursuant to the Management
Agreement to provide funds for FF&E replacements or "Working Capital" as that
term is used in the Management Agreement) for each such Fiscal Year or (ii)
$50,000 for each of 1989 and 1990, $52,500 for 1991, and $55,000 for 1992. An
estimate of the amount by which Partnership administrative expenses exceed
interest paid to the Partnership on Partnership working capital for the first
nine Accounting Periods for each Fiscal Year through December 31, 1992, shall be
made by October 1 of each such Fiscal Year, and the General Partner shall pay
such amount, if any, to the Partnership in cash on or before such date. (For
1989 and 1990, the first estimate would be based upon the actual number of
Accounting Periods ending prior to September 8, 1990). A determination of the
total amount by which Partnership administrative expenses exceed interest paid
to the Partnership on Partnership working capital for each such Fiscal Year
shall be made by March 15 of the succeeding Fiscal Year, and the General Partner
shall pay to the Partnership in cash on or before such date such amount reduced
by the amount of the payment, if any, made by the General Partner on October 1
of the prior Fiscal Year (or, if the amount paid by the General Partner on
October 1 exceeded the payment due for the prior Fiscal Year, such excess shall
be refunded by the Partnership to the General Partner by March 15 of the
succeeding Fiscal Year); provided however, that (i) the sum of the payments made
by the General Partner, if any, on October 1, 1990 and on March 15, 1991 shall
not exceed $50,000; (ii) the sum of the payments made, if any, on October 1,
1991 and March 15, 1992 shall not exceed $52,500; and (iii) the sum of the
payments made, if any, on October 1, 1992 and March 15, 1993 shall not exceed
$55,000.
Section 3.05. Capital Contributions by Limited Partners.
A. The Initial Limited Partner heretofore has made a Capital Contribution
in the amount of $100 in cash, which Capital Contribution shall be returned to
the Initial Limited Partner upon the admission of the Original Limited Partners,
and the Initial 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 offer 414 Units for sale in a private
placement pursuant to the Private Placement Memorandum and will admit as
Original Limited Partners those Persons (i) who execute and file with the
Partnership the subscription documents specified in the Private Placement
Memorandum, together with such other documents as the General Partner may deem
necessary or desirable to effect such admission, (ii) 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
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whatsoever), and (iii) who pay the required Capital Contributions with respect
to Units for which a subscription is accepted in the manner set forth in Section
3.05C. The number of Units subscribed for by each Original Limited Partner is
set forth in the subscription documents executed and delivered by such Original
Limited Partner. Each Original Limited Partner's contribution in respect of the
Units subscribed for shall be (i) in cash $15,000 per Unit and an Investor Note
of such Limited Partner payable as set forth in Section 3.O5C or (ii) in cash in
the amount of $88,396 per Unit as full payment of the subscription price
($81,396 per Unit in cash if purchased by the General Partner, the Placement
Agent, or qualified officers, directors or employees of Marriott or its
Affiliates). No Partner shall be paid interest on any Capital Contribution. The
Partnership may pledge the aforesaid Investor Notes and its security interest
and related rights in the Units securing such Investor Notes to Marriott or its
Affiliates as security for payment of the Deferred Purchase Debt and may not
further pledge or assign such Investor Notes without the consent of Marriott.
C. The Original Limited Partners shall make Capital Contributions totaling
up to $41.4 million, for which each such Original Limited Partner shall
subscribe in Units of $100,000 each unless the General Partner and the Placement
Agent, in their sole discretion, shall accept subscriptions for one-half of a
Unit. For each Unit purchased, an Original Limited Partner shall make a Capital
Contribution by paying either (i) $88,396 per Unit in cash ($81,396 per Unit in
cash if purchased by the General Partner, the Placement Agent, or qualified
officers, directors or employees of Marriott or its Affiliates) upon execution
of the subscription documents as full payment of the subscription price or (ii)
$100,000 in the following installments: (a) a first installment in the amount of
$15,000 payable upon execution of the subscription documents; (b) a second
installment in the amount of $25,000 payable on June 20, 1990; (c) a third
installment in the amount of $30,000 payable on June 20, 1991; and (d) a fourth
installment in the amount of $30,000 payable on June 20, 1992. Original Limited
Partners purchasing more or less than a full Unit shall be required to make
proportionate installments on the dates aforesaid. Original Limited Partners may
prepay, without any reduction in the amount thereof, the foregoing installments,
in whole or in part, at any time prior to their respective due date.
D. The obligation of each Original Limited Partner to pay the installments
required by Section 3.05C, other than the first installment, shall be evidenced
by the delivery to the Partnership, concurrently with payment of the first
installment, of the Investor Note in the form of Exhibit A attached hereto
payable to the Partnership in the amount of $85,000 for each Unit purchased
($42,500 if one-half of a Unit is purchased) representing the amount of the
remaining unpaid Capital Contribution of such Limited Partner. Such Limited
Partners (i) may prepay in whole, or in part, all of the installments and (ii)
shall be required to prepay the outstanding balance of their Investor Notes to
the extent of any Sale Proceeds otherwise distributable to such Limited Partners
pursuant to Section 4.07 (which amounts shall be withheld by the Partnership and
applied in satisfaction of such obligation); provided that in the event such
Sale Proceeds are received by the Partnership in a taxable transaction or the
distribution thereof would result in federal taxable income to the Limited
Partners, the amount of Sale Proceeds per Unit withheld to prepay the
outstanding balance of the Limited Partners' Investor Notes shall be reduced by
an amount equal to the product of (i) the maximum marginal federal income tax
rate applicable to individuals multiplied by (ii) the federal taxable income per
Unit realized as a result of such taxable transaction and/or distribution, as
determined by the General Partner in good faith. If an Original Limited Partner
pays $88,396 per Unit in cash ($81,396 per Unit in cash if purchased by the
General Partner, the Placement Agent, or qualified officers, directors or
employees of Marriott or Its Affiliates) at the time he delivers an executed
subscription agreement, then there shall be no obligation to deliver an investor
Note to the Partnership. That portion of such $88,396 payment, or $81,396
payment if applicable, in excess of the amount that would have been paid upon
subscription had the Original Limited Partner selected the installment method of
paying the subscription price shall be applied by the Partnership at the
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closing of the offering made pursuant to the Private Placement Memorandum to
reduce the Deferred Purchase Debt.
E. Each Original Limited Partner electing to pay the Capital Contributions
with respect to one or more Units in installments hereby pledges to the
Partnership his Interest (including any Units with respect to which he has
elected to pay the full Capital Contribution in cash at the time of
subscription) as security for payment of the installments payable under such
Original Limited Partner's Investor Note. Notwithstanding the foregoing pledge,
each Original Limited Partner shall continue to be a Partner until such time as
he otherwise transfers his Interest in accordance with the terms of this
Agreement. The Partnership, acting through the General Partner, shall have all
rights and remedies granted to a secured party under the Uniform Commercial Code
as adopted in Delaware with respect to such interest, including, but not limited
to, the right to sell such Interest, and such Original Limited Partner agrees to
execute such instruments, including, without limitation, a financing statement
on Form UCC-1, as the General Partner may from time to time require to perfect
such security interest. For purposes of the Uniform Commercial Code, this
Agreement shall also be deemed to be a security agreement. In addition, the
General Partner shall have the right, at any time prior to the date of payment
of the last installment of Capital Contributions specified in Section 3.05C
above, to have a credit check performed with respect to any Limited Partner
making payment of Capital Contributions in installments.
F. The following provisions shall apply in the event a Limited Partner
fails to make installment payments when due:
(i) A Limited Partner who fails to pay when due all or any portion of
any installment for a period of 10 days shall be in default hereunder and
the Defaulting Limited Partner shall be required to pay the Partnership a
late payment charge equal to five percent (5%) of such unpaid installment
or portion thereof. If a default shall continue for more than 30 days after
notice to the Defaulting Limited Partner of such default, in addition to
the aforesaid late charge, the unpaid portion of such installment or
portion thereof shall bear interest from the date due until paid in full at
a rate equal to the lesser of (a) sixteen percent (16%) per annum or (b)
the maximum rate permitted by law. If the late charge is deemed to be
interest under applicable law, it may only be imposed to the extent it does
not cause total interest to exceed the maximum rate permitted by law. A
Defaulting Limited Partner shall have no voting rights (except that in
connection with a proposal to continue the business of the Partnership and
to appoint one or more general partners as provided in Section 6.05A, such
Defaulting Limited Partner agrees to vote in favor of such action and
hereby grants an irrevocable proxy to any General Partner for such purpose)
and no right to receive any distributions of cash (including, without
limitation, Capital Receipts, if any) or allocations of Net Profits, Gains,
Losses, or Net Losses with respect to his Interest for so long as any
unpaid installments plus any late charge or interest attributable to such
unpaid installment or portion thereof remains unpaid. The General Partner
will deduct the amount of any delinquent installments, late penalty or
interest from any cash distributions available to Defaulting Limited
Partners.
(ii) If a default shall continue for more than 30 days after notice to
the Defaulting Limited Partner, the General Partner shall have the option
of accelerating the payment of the entire unpaid balance of the Investor
Note of the Defaulting Limited Partner and the additional option of
purchasing (for the price set forth below) all or a portion of the
Defaulting Limited Partner's Interest (including the portion of such
Defaulting Limited Partner's Interest, if any, with respect to which the
Limited Partner elected to pay the full Capital Contribution in cash at the
time of subscription). Such option may be exercised by the General Partner
by giving the Partnership and the Defaulting Limited Partner a Default
Notice. The purchase price to be paid to the Defaulting Limited Partner
shall be an amount equal to the greater of (x) 10% of the amount of Capital
Contributions of the Defaulting Limited Partner actually paid (excluding
for this
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purpose the unpaid portion of any Investor Note secured thereby) in respect
of the Interest being purchased less the sum of (i) the total amount of
cash distributions, if any, theretofore made to the Defaulting Limited
Partner in respect of the Interest being purchased, (ii) any reasonable
expenses incurred by the Partnership and by the General Partner in
connection with such purchase, (iii) all tax credits previously reported by
the Partnership for all Fiscal Years then ended allocable to the Interest
being purchased, and (iv) 30% of the Net Losses previously reported by the
Partnership for all Fiscal Years then ended allocable to the Interest being
purchased, or (y) three percent (3%) of the amount of the Capital
Contributions of the Defaulting Limited Partner actually paid (excluding
for this purpose the principal portion of any Investor Note secured
thereby) in respect of the Interest being purchased. Such purchase price
shall be paid in cash within 30 days after the date of the consummation of
the purchase. The General Partner shall also pay to the Partnership an
amount equal to all Capital Contribution installments in respect of the
Interest being purchased then due and not theretofore paid by the
Defaulting Limited Partner (including the unpaid installment giving rise to
the default) and shall assume all other obligations (other than late
payment charges and interest due as a result of the default) of the
Defaulting Limited Partner in respect of the Interest being purchased, if
any, to the Partnership. At any time prior to any sale of all or any
portion of the Defaulting Limited Partner's Interest as provided in this
Section 3.05F, the General Partner may but shall not be obligated to accept
full payment from the Defaulting Limited Partner of any unpaid installment
then overdue and any late payment charge plus interest. The acceptance of
such payment by the General Partner shall extinguish the further right (as
hereafter defined) of the General Partner to purchase the Defaulting
Limited Partner's Interest.
(iii) In the event that the General Partner does not acquire all of the
Interest of a Defaulting Limited Partner and after the exercise of due
diligence, the General Partner is unable to find a purchaser for all or the
balance of the Defaulting Limited Partner's Interest for the price set
forth in clause (ii) above, then the Defaulting Limited Partner shall sell
such Interest or the balance of such Interest, as the case may be, on such
terms and conditions as the General Partner deems reasonable under the
circumstances to any Person, including the General Partner; provided,
however, if such purchaser is the General Partner or an Affiliate of the
General Partner, it shall be required to agree to assume the obligation of
the Defaulting Limited Partner to make payments of at least 75% of the
unpaid balance of the installments to the extent of the Interest so
acquired. At the closing of any purchase and sale pursuant to this clause
(iii), the purchaser also shall pay to the Partnership the unpaid balance
of the installments then due and owing by the Defaulting Limited Partner
and shall agree to thereafter make payment of any future installments as
and when the same shall become due and payable. The Defaulting Limited
Partner shall pay all of the Partnership's and General Partner's costs and
expenses incurred in connection with any purchase and sale of a Defaulting
Limited Partner's Interest pursuant to this clause (iii).
(iv) A purchaser of all or any part of the Interest of a Defaulting
Limited Partner will receive all of the cash not yet distributed to the
Defaulting Limited Partner, including cash earned prior to the default. All
Net Profits, Net Losses, and deductions that would otherwise be allocated
in accordance with Sections 4.01, 4.02 and 4.11 to a Defaulting Limited
Partner shall be allocated, from and after the date of default to, but not
including, the date, if any, on which the Interest of such Defaulting
Limited Partner shall be purchased, among the non-Defaulting Limited
Partners in proportion to the number of Units owned by each. All Defaulting
Limited Partner Allocations from and after the date of purchase of the
Defaulting Limited Partner's Interest until the expiration of the Fiscal
Year in which such purchase date falls shall be allocated to the purchaser.
In the following Fiscal Year or Fiscal Years, all Net Profits, Net Losses,
and deductions of the Partnership allocable to the Limited Partners under
Article Four shall first be allocated until the purchaser's Capital Account
balance shall be equal in amount to the Capital Account balance of a non-
Defaulting Partner owning the same number of Units as the purchaser.
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(v) Notwithstanding the foregoing provisions of this Section 3.05F,
the obligations of the Defaulting Limited Partner under this Section 3.05
shall not be extinguished by the existence of any option of the General
Partner to purchase the Interest of the Defaulting Limited Partner, or by
its exercise, or by any agreement by any Person to purchase such Interest,
but only to the extent of payment of the unpaid installments together with
interest thereon made in the Defaulting Limited Partner's stead by any
purchaser of such Interest.
(vi) In addition to the other rights of the Partnership against the
Defaulting Limited Partner, the Partnership may avail itself of appropriate
legal remedies at law or in equity to compel payment of any portion of the
installments remaining unpaid together with any interest thereon remaining
unpaid, together with reasonable court costs and legal fees in the event of
litigation against the Defaulting Limited Partner.
G. In the event that the Partnership makes any tax payment on behalf of or
with respect to a Limited Partner, except to the extent (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, the Limited Partner shall contribute to the Partnership an amount equal
to such tax payment. The Limited Partner shall make this contribution within 45
days after notice from the General Partner that the contribution must be made.
If the Limited Partner fails to pay such amount when due, the provisions of
Section 3.05F shall apply as if such payment were an installment payment that
was not paid when due.
Section 3.06. Additional Issuances of Units and Capital Contributions.
A. No Units except those Units issued by the Partnership in connection with
the offering pursuant to the Private Placement Memorandum 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, and 8.02E
or in connection with an issuance of additional Units permitted under Section
3.06A.
Section 3.07. Partnership Capital.
A. The Capital Contribution of each Limited Partner and the General Partner
shall be credited to each such Partner's Capital Account; provided, however,
that the deemed increase in the Capital Contribution of any Limited Partner due
to (i) any relinquished selling commissions or other fees with respect to such
Limited Partner or (ii) any reduction of $11,604 per Unit for any Limited
Partner making full payment of such Limited Partner's Capital Contribution
($18,604 for the General Partner, the Placement Agent, or qualified officers,
directors or employees of Marriott or any of its Affiliates) upon execution of
the subscription agreement shall not be credited to such Limited Partner's
Capital Account and a Limited Partner's obligation to make additional
contributions in installments shall not be credited to his Capital Account until
the installments are actually contributed. 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. For purposes of this Section 3.07, upon a distribution in kind of
Partnership property, the Capital Accounts of the Partners will be debited or
credited as though the property had been sold for an amount equal to its fair
market value, and gain or loss which would have been recognized for
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Federal income tax purposes had the property actually been sold will be
allocated to the Partners under Article Four.
C. 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. Initial Working Capital Reserve. The General Partner, as a
third party and not as a Partner, guarantees to the Partnership that the initial
working capital reserves of the Partnership following the admission of the
Original Limited Partners, determined after the payment of all Organization,
Offering and Acquisition Expenses (the "Initial Working Capital Reserve"), shall
be equal to $775,000. In the event that the Initial Working Capital Reserve is
less than $775,000, the General Partner, as a third party and not as a Partner,
shall pay such difference to the Partnership in cash. In consideration of the
foregoing, the General Partner, as a third party and not as a Partner, shall be
entitled to receive as a payment from the Partnership any amount by which the
Initial Working Capital Reserve exceeds $775,000. As used herein, "Organization,
Offering and Acquisition Expenses" means expenses incurred by the Partnership in
connection with the offering of the Units as set forth in the Private Placement
Memorandum (including, without limitation, all amounts payable to the Placement
Agent), the admission of the Original Limited Partners, the purchase of the
Hotels (excluding interest payable on the Deferred Purchase Debt) and the
funding of the Permanent Loan. No payments pursuant to this Section 3.10 shall
be reflected in Capital Accounts or otherwise treated as payments to or from a
Partner in the Partnership.
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.
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Section 4.02. Allocation of Net Losses. Subject to the provisions of
Section 4.10, Net Losses for each Fiscal Year shall be allocated 75% to the
General Partner and 25% 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:
(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 of the
balances in the Capital Accounts of the Limited Partners to the General
Partner's Capital Accounts 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 of
the balances 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.
A. Except as may be provided in Sections 4.04B, 4.04C, 4.04D, or 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.
B. If, at the time any allocation is made pursuant to Section 4.03, the
balance in any Limited Partner's Capital Account when divided by the number of
Units owned by such Limited Partner ("Capital Account Balance per Unit") is
greater or lesser than the Capital Account Balance per Unit of any other Limited
Partner, then the Gain or Loss allocated to the Limited Partners pursuant to
Section 4.03 shall first be allocated among the Limited Partners in a manner
that will, to the extent possible, cause all the Limited Partners' Capital
Account Balances per Unit to be equal.
C. For purposes of Article Four, any Original Limited Partner admitted to
the Partnership subsequent to the initial closing of the offering pursuant to
the Private Placement Memorandum shall be considered to be admitted to the
Partnership on the first day of the Accounting Period in which the General
Partner accepts such Original Limited Partner as a Limited Partner and the books
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and records reflect such Original Limited Partner as so admitted. In any Fiscal
Year in which any Original Limited Partner is admitted to the Partnership
subsequent to such initial closing, then the allocation among the Limited
Partners of Net Profits, Gains, Net Losses, and Losses allocated to the Limited
Partners shall be determined as follows: (i) Net Profits and Net Losses shall be
attributed to each Accounting Period pro rata based on the number of Accounting
Periods in such Fiscal Year; (ii) Net Profits and Net Losses attributed to each
Accounting Period shall be allocated solely among the Limited Partners who were
considered admitted as of the first day of such Accounting Period, pro rata in
accordance with the number of Units owned by each such Limited Partner during
such Accounting Period; and (iii) any Gains or Losses shall be allocated among
the Limited Partners who were considered admitted as of the first day of an
Accounting Period 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 during such Accounting Period.
D. 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 owned 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 semiannually, not later than October 31st of each Fiscal Year and
April 15th of each succeeding Fiscal Year, as follows:
(i) first, until the Partners shall have received with respect to
such Fiscal Year an amount equal to the Partners' 10% Preferred
Distribution, 1% to the General Partner and 99% to the Limited Partners;
(ii) second, until the Partners have received cumulative distributions
of Capital Receipts pursuant to Sections 4.06(ii) and 4.07A(ii) equal to
$20,909,091 (of which the Limited Partners' portion would be equal to
$50,000 per Unit), 1% to the General Partner and 99% to the Limited
Partners;
(iii) third, until the Partners have received cumulative distributions
of Capital Receipts pursuant to Sections 4.06(ii) and 4.07A(ii) equal to
$41,818,182 (of which the Limited Partners' portion would be equal to
$100,000 per Unit), 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. For purposes of Section 4.05A(i) above, distributions made within 105
days after the end of a Fiscal Year shall be considered made with respect to
such prior Fiscal Year.
C. In determining the amount of the distribution to be made on or before
October 31st of each Fiscal Year, the General Partner shall estimate the Cash
Available for Distribution with respect to such Fiscal Year as a result of the
first nine Accounting Periods of such Fiscal Year (for 1990, the actual number
of Accounting Periods ending prior to September 8) and shall reduce such amount
by such reserves as the General Partner reasonably determines are necessary to
provide for the ongoing operation of the Partnership. The amount of the
distribution to be made on or before April
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15th of the succeeding Fiscal Year shall be the Cash Available for Distribution
for the prior Fiscal Year, reduced by the amount of the distribution made with
respect to such Fiscal Year pursuant to the preceding sentence.
D. The Partners' 10% Preferred Distribution for the Partnership's initial
year of operations will be pro-rated, based upon the number of days in the
Fiscal Year from the date of the closing of the private placement pursuant to
the Private Placement Memorandum. If such private placement pursuant to the
Private Placement Memorandum closes in 1989, the Partners' 10% Preferred
Distribution for 1990 shall be computed to include the number of days during
1989 from the date of the closing of such private placement.
Section 4.06. Distribution of Refinancing Proceeds. Refinancing Proceeds
shall, unless the General Partner, in its reasonable discretion, shall determine
to retain any such amounts in the Partnership, 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' 15%
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, 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' 15% 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 4.07A(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
Hotel 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
of record as of the end of such Fiscal Quarter, pro rata in accordance with the
number of Units owned by each as of the end of such Fiscal Quarter, after any
deduction pursuant to Section 3.05F(i). 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),
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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. For purposes of this Section 4.08, all Units sold to Original
Limited Partners shall be considered owned by such Original Limited Partners
from the initial closing of the offering pursuant to the Private Placement
Memorandum, without regard to whether such Units are actually purchased at that
time or at a later time.
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 Partnership property subject to one or more
Nonrecourse Liabilities (as such allocable portion is determined pursuant
so section 1.704-1T(b)(4)(iv)(e)(2) of the Treasury Regulations); or
(ii) such Partner's Adjusted Capital Account Deficit as 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
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(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 determined and the
allocations made in accordance with the required allocation 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. If in any Fiscal Year items of Partnership loss or deduction are
specially allocated to a Partner pursuant to Section 4.10E, such Partner shall
be specially allocated in such year (and, if necessary, subsequent years) items
of Partnership gross income in an amount equal to the amount of such specially
allocated loss or deduction.
G. 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. In this regard, there shall
be charged to the Capital Account of each Unit sold to the General Partner, the
Placement Agent, or qualified officers, directors or employees of Marriott or
its Affiliates) an amount up so $1,000 per Unit and to the Capital Account of
each Unit sold by the Placement Agent (other than Units sold to the General
Partner, the Placement Agent, or qualified officers, directors or employees of
Marriott or its Affiliates) an amount of up to $8,000 per Unit. Any other such
syndication expenses shall be allocated and charged to the Capital Accounts of
the Partners in the following manner: 99% to the Limited Partners and 1% to the
General Partner.
H. Deductions for interest expense on the Deferred Purchase Debt incurred
in each Fiscal Year shall be allocated solely to the Limited Partners owning the
Units during such Fiscal Year with respect to which Capital Contributions are
being paid in installments; provided, however, that the total allocation under
this Section 4.10H with respect to any Unit since the formation of the
Partnership shall not exceed $11,604.
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I. "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 under
such Sections, 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.
J. 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 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.
K. 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 transferor 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.
L. If the closing with respect to the private placement pursuant to the
Private Placement Memorandum 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.
M. To the extent that the Partnership incurs administrative expenses for
any Fiscal Year through December 31, 1992, in an amount that would require a
Capital Contribution by the General Partner pursuant to Section 3.04C, the
General Partner shall be allocated for such Fiscal Year deductions attributable
to such administrative expenses equal to the amount of the Capital Contribution
made by the General Partner pursuant to Section 3.04C with respect to such
Fiscal Year.
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 20% and the
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Limited Partners' aggregate interest in Partnership profits shall equal 80%.
Each Limited Partner's share of Partnership profits shall be the product of 80%
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
sentence 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 in 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 Dunes or 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.
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 the Act.
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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 Management Agreement, the Loan Agreement, and the 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) the Deferred Purchase Debt, (b) any
amounts advanced by the General Partner or an Affiliate of the General
Partner (including, without limitation, advances by Marriott under the 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, (c) the Permanent Loan, (d) amounts
incurred for the purpose of making distributions to the Partners, (e) any
indebtedness the incurrence of which has been specifically Consented to by
the Limited Partners under Section 5.02B, (f) 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 (g) 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, unless permitted pursuant
to Section 5.02B, 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 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. The General Partner may on behalf of
the Partnership enter into agreements to employ agents, attorneys,
accountants, engineers, appraisers, or other consultants or contractors who
may be Affiliates of the General Partner and may enter into agreements to
employ Affiliates of the General Partner to provide further or additional
services to the Partnership; provided that any employment of such Persons
will be subject to Section 5.01E and will be on terms not less favorable to
the Partnership than those offered by Persons who are not Affiliates of the
General Partner for comparable services;
(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
D-22
Partnership, as may be lawfully carried on or performed by a limited
partnership under the laws of the State of Delaware, the states where the
Hotels are located, 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 so the
detriment of the Limited Partners from the terms as contemplated by the
Partners (as reflected in the Private Placement Memorandum), 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 Private Placement Memorandum, any
agreements, contracts and arrangements between the Partnership and the General
Partner or any of its Affiliates (except for rendering legal, tax, financial,
accounting, procurement and engineering services by employees of the General
Partner and Affiliates of the General Partner, which agreements shall be on
commercially reasonable terms) shall be subject to the following additional
conditions:
(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 such services or to sell or lease such goods or materials covered
thereby;
(iii) such agreements, contracts, or arrangements must be fair to the
Partnership and reflect commercially reasonable terms and shall be embodied
in a written contract which precisely describes the subject matter thereof
and all compensation to be paid therefor;
(iv) no rebates or give-ups may be received by the General Partner or
any such Affiliate and 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; and
(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).
D-23
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 Private Placement Memorandum (including the agency agreement
entered into with the Placement Agent in connection with the sale of the Units,
which agreement 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 $250,000 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
Placement 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) crease 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 Placement 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, or in other entities owning hotels, in addition to the Hotels,
or in other assets not reasonably related to the conduct of the
Partnership's business as set forth in Section 2.03;
(ii) sell or otherwise dispose of the Fairview Park Hotel, or any
interest therein, or more than two of the other Hotels, or any interest
therein, whether in one transaction or more than one transaction during the
term of the Partnership; provided, however, that if it is proposed that the
Partnership sell any Hotel or interest therein to the General Partner or an
Affiliate of the General Partner, the Consent of the Limited Partners must
be obtained after the 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 value of the Hotel or Hotels to be sold, such appraisals to be
prepared by independent, nationally recognized appraisers
D-24
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 its 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 parry); (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 affects
the rights of or benefits to the Limited Partners or, in the case of the
Purchase Agreement, the 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 the Manager with respect to one or more of the Hotels on terms
substantially the same as those of the Management Agreement as contemplated
therein, in the event of the refinancing of fewer than all of the Hotels;
(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 any Hotel unless
(a) the Hotel 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; and (b) the Partnership has
obtained debt financing to finance the costs of the addition on a
nonrecourse basis as to all the Partners and the Partnership (including the
General Partner), except as provided in Section 5.02B(viii);
(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 (other than the Permanent Loan, the Deferred Purchase Debt, and
liabilities to Marriott and its Affiliates with respect to the Debt Service
Guarantee) otherwise permitted to be incurred pursuant to the terms of this
Agreement if such debt would not constitute in its entirety both "qualified
nonrecourse financing" within the meaning of section 465(b)(6)(B) of the
Code and the applicable Treasury Regulations and a Nonrecourse Liability,
unless (a) the General Partner, in accordance with its fiduciary duties as
a general partner and taking into consideration both the reasonably
anticipated 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 either in or 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) cause the Partnership to borrow any funds from the General Partner
or any Affiliate of the General Partner unless such borrowing is in
accordance with Section 5.01E and Section 5.06C;
D-25
(xi) cause the Partnership to acquire any property from the General
Partner and any Affiliate of the General Partner in exchange for Interests
in the Partnership; 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 Hotels 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 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, Hotel working capital and net revenues
from Hotel operations).
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.
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D. The General Partner shall have at the time of the admission of the
Original 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 $4.2 million
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. If required by law, the General Partner shall file
or cause to be filed for recordation in the office of the appropriate
authorities of the State of Delaware, and in the proper office or offices in
each other jurisdiction in which the Partnership is formed or qualified, such
certificates (including limited partnership and fictitious name certificates)
and other documents as are required by the applicable statutes, rules or
regulations of any such Jurisdiction or as are necessary to reflect the identity
of the Partners and the amounts of their respective Capital Contributions.
F. The General Partner shall be obligated to use its best efforts to remove
any General Partner or Affiliate guarantee or personal liability with respect to
any Partnership debt that was permitted under Section 5.02B(viii) hereof when
such action was incurred, but that subsequently results or will result in
material adverse tax consequences to the Limited Partners if (i) such guarantee
or personal liability would no longer be permitted if such debt were first being
incurred at the time of such adverse consequences and (ii) the removal of such
guarantee or personal liability would substantially mitigate the material
adverse tax consequences to the Limited Partners.
G. 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.
H. 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.
I. 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.
J. 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.
K. 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.
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L. The General Partner shall maintain or cause to be maintained the
subscription documents obtained from the Original Limited Partners to
demonstrate that they meet the suitability standards employed in connection with
the offering pursuant to the Private Placement Memorandum and shall obtain a
commitment from the Placement Agent to maintain the same record of information
required of the General Partner.
M. 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 Hotels, 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 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(ii) in the case of a sale and to the Management
Agreement and the Loan Agreement, use its reasonable best efforts to cause the
Partnership to effectuate such a sale or refinancing, 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
Three, Article Four, Article Five or Article Eight. Notwithstanding the
foregoing, however, the 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. 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 this Agreement or 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 to 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.
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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 and such action or
inaction shall have been 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 (ii) 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) and (ii) 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 and 8.02E and except as
may otherwise be provided as a matter of law or under the Permanent Loan.
However, except for advances made pursuant to the Debt Service Guarantee
(which advances will be repaid in accordance with such Guarantee), to the
extent the General Partner or any of its Affiliates 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 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), and such advances and interest accrued thereon shall be
due and payable upon that date which is the fifteenth anniversary of the
date on which any such advances were made; provided, however, that any and
all such advances and interest accrued thereon governed by this Section
5.06C shall be paid (i) out of any Operating Profit (as defined in the
Management Agreement) with respect to such Fiscal Year as part of or
immediately after payment of Other Qualifying Debt Service (as defined in
the Management Agreement), and (ii) upon the liquidation or dissolution of
the Partnership or the distribution to the Partners of any Capital Receipts
from the sale of a Hotel immediately after payment of outstanding advances
and accrued interest under the Debt Service Guarantee and prior to any
distributions to the Partners pursuant to Section 4.07 in connection
therewith. Notwithstanding the foregoing, up to $2 million of any such
advances made during a Fiscal Year and any Debt Service Guarantee advances
during any Fiscal Year shall be repayable, to the extent funds are available
therefor, with interest out of Operating Profit with respect to such Fiscal
Year immediately prior to provision for payment of the Partners' 10%
Preferred Distribution. No advance may be made by the General Partner or any
of its Affiliates under this Section 5.06C that is directly or indirectly
used to permit the Partnership to make a required debt service payment with
respect to the Permanent Loan (and any replacement financing therefor)
unless and to the extent
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such payment is in excess of the amount then available to the Partnership under
the Debt Service Guarantee. Any advance made pursuant to the preceding sentence
shall be repaid with the proceeds of an advance pursuant to the Debt Service
Guarantee as soon as such an advance would be permitted.
D. Notwithstanding the foregoing, neither the General Partner nor any other
Person 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
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 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 interest, 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
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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 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 Matters
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.
SECTION 5.08. Other Limitations. The following additional limitations shall
apply to the operation and management of the Partnership:
(i) 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 Hotels, no Capital Receipts shall be
reinvested in the Hotels 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; and
(ii) the Partnership shall not make any loans or otherwise extend
credit to the General Partner or any of its Affiliates.
ARTICLE SIX
WITHDRAWAL AND REMOVAL OF GENERAL PARTNER
SECTION 6.01. Limitation on Voluntary Withdrawal. Except as provided in
Section 5.02B, the general Partner shall not have the right (but shall have the
power) to retire or withdraw voluntarily
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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 rights to up to 80% of its Interest in
the Net Profits, Net Losses, 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 anything to the contrary set forth in this
Agreement and notwithstanding such assignment by the General Partner of its
Interest in the Net Profits, Net Losses, Gains, Losses, 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 the power to exercise 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 affect 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 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.
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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 of the Partnership shall become a limited partner
interest but without any voting or consensual ______ 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) and its Interest shall 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 "fair market value" of such interest as set forth
below) at the "fair market value" of such interest. For purposes of the
preceding sentence, the "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 an independent appraiser selected by the
Partnership and the removed General Partner (provided that, if the parties
cannot agree upon such an appraiser, then each party shall select an appraiser
and the two appraisers selected by the parties shall select a third appraiser,
with the "fair market value" of the removed General Partner's Interest to be
determined by the average of the amounts determined by the three appraisers,
disregarding entirely any appraisal that differs by more than twenty percent
(20%) from the amount determined by the appraiser whose determination is between
the highest and lowest of the amounts determined by the three appraisers).
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 appraisals 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 Partnership 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, in breach of the obligation set forth in the
preceding sentence, who agrees to continue the business of the Partnership in
breach of this Agreement, 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, in breach of the
obligation set forth in the first sentence of Section 6.05A, who agrees to
continue the business of the Partnership in breach of this Agreement, 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,
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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:
(i) the reconstituted Partnership shall continue until the end of the
term set forth in Section 2.04 unless earlier dissolved in accordance with
the 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 Original 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.
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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. With respect to any proposed
assignment within one year of the admission of the Original Limited Partner
whose Unit is to be transferred, the General Partner will require an opinion
from counsel of the assignee of the Interest to the effect that no such filing
would be required and that no such violation would occur as a result of such
assignment.
D. No purported assignment by a Limited Partner of any Unit after which
the assignor or the assignee would hold a fraction of a Unit (other than
one-half of a Unit) will be permitted or recognized.
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 assignment of any lnterest 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.
G. 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 a Hotel.
H. 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.
I. 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.
J. 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 be considered either
a "publicly traded partnership," within the meaning of section 7704 of the Code,
or an association taxable as a corporation under the applicable federal income
tax laws.
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
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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 signed by both the assignor and the assignee
and such instrument evidences, inter alia, the written acceptance by the
assignee of all of the terms and provisions of this Agreement and represents
that such assignment was made in accordance with all applicable laws and
regulations (including investment suitability standards), and (ii) the General
Partner has determined that such an assignment is permitted under this Article
Seven. 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. As a condition to any voluntary assignment of an
Interest, the General Partner may require that the assignor or the assignee of
the Interest or their respective representatives provide to the Partnership
information sufficient to permit counsel to the Partnership to determine that
the assignment is not prohibited by this Article Seven.
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;
(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 by 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 the Interest of a Limited Partner in
accordance with the terms of this Article Seven, and who has satisfied the
requirements of Sections 7.01, 7.02B, and 7.02C shall become a Substituted
Limited Partner when the General Partner has accepted such Person as a Limited
Partner and the books and records of the Partnership reflect such Person as
admitted to the
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Partnership as a Limited Partner and when such Person shall have satisfied the
conditions of Section 11.02A and shall have paid all reasonable legal fees and
filing costs in connection with the substitution as a Limited Partner; provided,
however, that the General Partner's Consent to the substitution of any assignee
of an Interest as a Substituted Limited Partner may be granted or withheld in
its sole discretion.
F. 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 any specially allocated items 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.
G. Any Limited Partner who assigns or exchanges all or any portion of a
Unit must notify the Partnership of such assignment or exchange. Such
notification must be in writing and must be within fifteen days of the exchange.
Such notification must include the names and addresses of the transferor and
transferee, the taxpayer identification numbers of the transferor and the
transferee, the date of the assignment or exchange, and any other information
required by the General Partner.
H. There shall be no restrictions on the assignments of Interests except as
provided in Article Six or this Article Seven.
ARTICLE EIGHT
Dissolution and Liquidation of the Partnership
SECTION 8.01. Events Causing Dissolution.
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 not 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 obligation 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 Sections 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; or
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(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 6.6.05B, 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;
(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 so 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.
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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, 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 to the extent of such positive balances or to
creditors. 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
terminates 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, if applicable.
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 for any purpose reasonably related to the Partner's Interest in
the Partnership.
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),
and only for any purpose reasonably related to the Partner's Interest in the
Partnership, (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 the
Federal, state, and local income tax returns of the Partnership and any
appraisal reports obtained by 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
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cash and a description and statement of the value of any property or services
contributed to the Partnership as of 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 of accounting. The Partnership will report its
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 be 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 the closing of the offering pursuant to the
Private Placement Memorandum 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
Hotels 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, 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) 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;
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(iv) a report of the activities of the Partnership for such Fiscal
Year; and
(v) a budget (which need not be audited) setting forth the expected
Net Profits and Net Losses per Unit for the current Fiscal Year.
C. Within 75 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); and (iv) 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 Original Limited Partners pursuant to the
initial closing of the offering pursuant to the Private Placement Memorandum,
(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.
ARTICLE TEN
Meetings 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%
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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 nor 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 such meeting 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. Such Notification 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.
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.
G. If any Consents of Limited Partners, with or without a meeting, are to
be requested, made or taken, any Units held by the General Partner or any of its
Affiliates (other than officers, directors
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or employees of the General Partner or any of its Affiliates who own Units for
their own account) 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.
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
a 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. If the Partnership terminates any such agreement, the
duties previously performed by the General Partner or its Affiliate under the
agreement may only thereafter be performed by the General Partner or any of its
Affiliates with the Consent of the Limited Partners to such performance.
B. To the extent not inconsistent with the Act or other applicable law, in
the event that the General Partner (i) has committed a material breach of its
obligations under Section 5.03 and not, within 30 days thereafter, remedied such
breach, (ii) has breached the restrictions under Section 5.02 (provided that in
case of Section 5.02B(x), such breach must be material and not have been
remedied within 30 days thereafter) (iii) has committed any act of fraud, (iv)
has committed and not, within 30 days, remedied any act of bad faith, or gross
negligence or breach of fiduciary duty of loyalty or (v) has committed a breach
of any other provision of this Agreement and not remedied the same within 30
days after receipt of notice thereof, in carrying out its duties as the general
partner, the Limited Partners may, by Consent of the Limited Partners without
the Consent of the General Partner, 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
l0.02C, 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 l0.02C, 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;
D-43
(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 l0.02B(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 purposes 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 l0.02B 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 l0.02B 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, including each Substituted 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;
(iv) any instrument or document requested by the Partnership or any
purchaser of the Interest of a Defaulting Limited Partner under the
provisions of Section 3.05 of this Agreement;
D-44
(v) all documents, including but not limited to financing statements,
necessary or appropriate to perfect and continue the Partnership's security
interest in such Limited Partner's pledged Interest; and
(vi) any instrument, certificate, or document to implement the
provisions of Section 5.01C(vi).
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 Original Limited
Partner, Substituted Limited Partner, 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
Original 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) except for the General
Partner's right to assign its interest in allocations and distributions, 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 be 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 a substitution of a Limited
Partner, than once each calendar quarter.
D-45
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 the
provisions thereof so long 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
herein 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.
In Witness Whereof, the undersigned have executed this Agreement as of the
date first above written.
General Partner:
Marriott MDAH One Corporation
By: [SIGNATURE APPEARS HERE]
------------------------------------------
Its: VP
-----------------------------------------
Withdrawing Initial Limited Partner:
Christopher G. Townsend
/s/ Christopher G. Townsend
---------------------------------------------
D-46
Limited Partners:
All Limited Partners now and hereafter
admitted to the Partnership as limited
partners of the Partnership, pursuant to
powers of attorney now and hereafter
executed in favor of and granted and
delivered to the General Partner
Marriott MDAH One Corporation, as
Attorney-In-Fact for all Limited Partners
By: [SIGNATURE APPEARS HERE]
------------------------------------------
Its: VP
-----------------------------------------
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/ Matthew J. Hart
------------------------------------------
Its: VP and Asst. Treasurer
-----------------------------------------
Host International, Inc.
By: /s/ Matthew J. Hart
------------------------------------------
Its: Vice President
-----------------------------------------
D-47
Exhibit A
Amended and Restated
Agreement of Limited Partnership
$85,000 per Unit , 1989
Units
- -------
MARRIOTT DIVERSIFIED AMERICAN HOTELS, L.P.
LIMITED PARTNER NOTE
For Value Received, the undersigned promises to pay to the order of
Marriott Diversified American Hotels, L.P., a Delaware limited partnership (the
"Partnership"), at its offices at 10400 Fernwood Road, Bethesda, Maryland 20058,
or at such other place as the holder hereof from time to time shall designate in
writing to the undersigned, the principal sum of Eighty-Five Thousand Dollars
($85,000) per unit of limited partnership interest in the Partnership ("Unit")
for the number of Units set forth above, without interest, in the following
installments pet Unit at the following times:
Due Date Amount
-------- ------
June 20, 1990...... $25,000 per Unit for the number of Units set forth above
June 20, 1991...... $30,000 per Unit for the number of Units set forth above
June 20, 1992...... $30,000 per Unit for the number of Units set forth above
In the event the undersigned fails to pay in lawful money of the United
States of America any amount which he is required to pay to the Partnership on
or before the 10th day following the date when such amount is due and payable, a
late payment fee of five percent (5%) of the amount of the overdue payment shall
be added to the amount due. If default shall continue beyond 30 days after
notice thereof to the undersigned, in addition to the aforesaid late charge, the
unpaid portion of such installment shall bear interest from the due date of such
installment until paid in full at a rate equal to the lesser of sixteen percent
(16%) per annum or the maximum rate permitted by law. In no event may the late
charge, if deemed to be interest under law, when added to any interest exceed
the rate permitted by law. If the default continues beyond 30 days after notice
thereof to the undersigned, the general partner of the Partnership (the "General
Partner") shall have the option of accelerating the payment of the entire unpaid
balance of this note.
The undersigned shall have the right to prepay, in whole or in part, at any
time, the unpaid principal balance of this note.
This note may not be modified orally, and shall be governed by, enforced,
determined and construed in accordance with the laws of the State of Delaware.
The undersigned hereby consents to the non-exclusive jurisdiction and venue of
the courts of the State of Delaware and of the United States for the District of
Delaware in connection with the collection of this note or any matter relating
thereto and hereby irrevocably appoints the General Partner as its agent to
receive service of process in the State of Delaware in connection with any such
matter.
In the event of default, the undersigned agrees to pay the costs of
collection, including, without limitation, reasonable attorneys' fees and
disbursements and court costs.
The undersigned waives presentment, demand for payment, notice of dishonor,
notice of protest, protest and all other notices or demands in connection with
the delivery, acceptance, performance, default, endorsement or guaranty of this
instrument, except as set forth in the Partnership Agreement. No failure or
delay by the holder of this note in exercising any right, power or privilege
hereunder shall operate as a waiver thereof, nor shall any single or partial
exercise thereof or course of dealing preclude any other or further exercise
thereof or the exercise of any other right, power or privilege.
D-48
To secure repayments of the outstanding amounts hereunder, the undersigned
has, pursuant to Section 3.05E of the Amended and Restated Agreement of Limited
Partnership of the Partnership (the "Partnership Agreement"), granted to the
Partnership a security interest in all of the undersigned's right, title and
interest in the undersigned's limited partnership interest in the Partnership.
Reference is made to Sections 3.05E and 3.05F of the Partnership Agreement for
the rights of the Partnership (and any other holder of this note) with respect
to such security interest and the remedies available with respect thereto in the
event of a default under this note. In the event that this note is negotiated,
endorsed, assigned, transferred and/or pledged, all references to the
Partnership in this note and in the provisions of the Partnership Agreement
regarding the rights of the Partnership in connection with the security interest
granted thereunder shall apply to the one which receives the Partnership's
interest as If that one instead of the Partnership was named as the original
payee under this note.
If any part of this note is determined by any court to be invalid or
unenforceable, the remaining portions of this note will remain in effect. Any
ambiguity or uncertainty in the note will be construed in favor of the
Partnership.
The terms of this note shall be binding upon and inure to the benefit of
the respective successors and assigns of the Partnership and the undersigned.
If Subscriber is an individual:
- -------------------------------------- ------------------------------------
Print Name of Subscriber Signature of Subscriber
- -------------------------------------- ------------------------------------
Print Name of Co-Subscriber (if any) Signature of Co-Subscriber (if any)
If Subscriber is a corporation, partnership or trust:
- --------------------------------------------------------------------------------
Print Name of Subscribing Entity
By:
----------------------------------- ------------------------------------
Print Name of Authorized Officer, Signature of Authorized Officer,
Partner or Trustee Partner or Trustee
- --------------------------------------
Print Title of Authorized Officer
- -------------------------------------- ------------------------------------
Print Name of Co-Trustee Signature of Co-Trustee.
(if required by trust instrument) (if required by trust instrument)
D-49